PACE and Beyond Cisco De. Vries | September 24, 2010
“ We are going to make it a lot easier to borrow money. We are doing this by encouraging communities to give you the option to pay the expense of retrofitting your home by paying it back on your property taxes. ” ”
National PACE Policy 24 States Have PACE Authority 4 States Have PACE Legislation Pending
FHFA/Fannie Mae PACE Activities June 2009: FHFA guidance letter – Concerns regarding senior lien and homeowner risk September 2009: Fannie Mae lender letter – Reviewing underwriting guidelines for PACE; Until guidelines are issued, treat payments as a special assessment May 2010: Fannie Mae lender letter – PACE “loans” and promise to issue additional guidance and work with federal and state agencies, while “preserving the status of mortgage loans originated as first liens”
FHFA/Fannie Mae PACE Activities July 2010: FHFA guidance letter – “Safety and soundness concerns” – Violation of Uniform Security Instrument – Reduce loan amount by potential PACE amount August 2010: Fannie Mae lender letter – PACE “loans” prior to July 6 th must be paid off at time of refinance – “Fannie Mae will not purchase mortgage loans [with PACE debt] unless the terms of the PACE program do not permit priority over first mortgage liens. ”
Path Forward Negotiation Litigation Legislation
Negotiations October 2009: White House led interagency working group – Result: White House Policy Framework for PACE – Release of DOE/ARRA Funds for PACE programs Spring 2010: Renewed discussions regarding PACE guidelines and pilots – Result: May 5 th Fannie Mae/Freddie Mac letters and July 6 th FHFA/FDIC/OCC letters July 2010: Congressionally led PACE discussions with FHFA and other regulators – Result: FHFA sent a letter to Members of Congress breaking off talks.
Litigation California Files Suit – People of the State of California vs. Federal Housing Finance Agency (Filed July 14, 2010) – “California seeks a prompt judicial declaration against Fannie Mae and Freddie Mac that, under California law: • (a) PACE programs operate by assessments, not loans, and such assessments are valid; • (b) liens that may result from PACE assessments, like those resulting from other types of assessments, have priority over mortgages; and • (c) participation in PACE programs is compatible with, and not in violation of, Fannie Mae’s and Freddie Mac’s standardized mortgage documents. ” Additional lawsuits announced by Babylon, Sonoma County, Leon County, and Sierra Club
Legislation PACE Assessment Protection Act – HOUSE: HR 5766 (Thompson); 48 co-sponsors – SENATE: S 3642 (Boxer); 5 co-sponsors “To ensure that the underwriting standards of Fannie Mae and Freddie Mac facilitate the use of property assessed clean energy programs to finance the installation of renewable energy and energy efficiency improvements. ” Legislation would require Fannie Mae and Freddie Mac to issue PACE underwriting standards that are consistent with US DOE guidelines
Legislative Strategy Four key steps – Make a priority for Congress overall – Oversight committee support • Senate Banking Committee (Sen. Dodd) • House Financial Services Committee (Rep. Frank) – Republican co-sponsors in House and Senate – Attach to appropriate vehicle How to help – Sample resolutions and other materials at: www. pacenow. org – State/Local Governments • Adam Byrnes, adam@renewfund. com, 510 -350 -3733 – ICLEI has great resources and been a leader in PACE efforts: www. iclei-usa. org
A Few Lessons From PACE Capital markets and regulators don’t know how to value energy retrofits and energy savings “Financing” has become a dirty word with property owners The value of a PACE program went way beyond financing – Eliminating “upfront cost” was partly psychological – Provides guidance on contractors, quality assurance, and roadmap Keep it simple! – Complexity is a killer – Don’t call it an audit!
What Now? Subordinate Lien PACE? PACE Commercial Alternative Financing Options for Residential Competitive Marketplace for Financing
PACE Options Subordinate Lien PACE – Maine moving forward – Attract capital? – Technical issues with tax collections Move Forward with PACE Commercial – Potential regulatory issues -- OCC – Strong support from commercial real estate firms, ESCOs, and contractors – DOE “playbook” for PACE Commercial in October
Alternatives to PACE Develop alternative financing options for residential – – Unsecured financing (personal credit based) Secured financing (such as a home equity loan or HUD Title 1) On-bill financing (utility bills) New structures Competitive marketplace for financing – Multiple cities/states pursuing
Energy Upgrade California One Stop Shop for all Clean Energy Services – – On-line Property Analysis Tool Contractor Marketplace Rebates and Incentives Financing Marketplace
Energy. Upgrade. California. org
Cisco De. Vries | cisco@renewfund. com | (510) 451 -7900
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