Financial experts at Fannie Mae and Freddie Mac who accumulated loses in the billions of dollars in the housing sector have made a decision to obstruct a promising and innovative procedure to finance local green energy ventures. The federal agency has come down heavily on an energy and money-saving program, Property Assessed Clean Energy (PACE), which indicates a clear opposition to green energy ventures.
PACE programs permit local governments to vend municipal bonds in order to raise capital which will then be lent to local homeowners for renewable energy projects. PACE helps the homeowners to retrofit their old homes for green energy in two ways; provides capital and the prospect that time taken to recover the energy cost savings from your investment could be more then the time taken to own your home.
If the house is sold, the new homeowners will bear the costs of energy-savings investments because the PACE program adds the green energy loan repayment to a homeowner’s property tax bill. Upon loan repayment the additional assessment ends after 10-20 years. The PACE programs give a great support to homeowners to change to renewable energy or even cut down on their energy consumption.
However the federal finance agencies are not supportive of the PACE programs. They believe that PACE has a shortsighted and narrow view of the world that willingly overlooks the value of reducing energy costs in the home. These financial agencies say they won’t purchase or sell mortgages that have PACE related liens primarily due to the debt pecking order.
Many homeowners are upside down on their homes. They have spent their housing equity on unnecessary buys like hot tubs and big screen TVS, as a result many mortgages are in trouble. Instead it could be spent on insulation, efficient furnace and solar panels that increase in value as the energy prices escalate. On July 6, the Federal Housing Finance Agency in a statement said that Houses with existing PACE loans will not be affected by proposed restrictions take appropriate actions that protect safe and sound operations which include:
- In PACE jurisdictions, adjusting loan-to value ratios which will indicative of highest permitted PACE loan amount.
- Making sure that loan covenant s need approval for any PACE loan.
- Accounting for extra obligations which is related to possible future PACE loans by ensuring strict borrower debt-to income ratios.
However there is an obvious hostility to the goals of green energy by federal housing agencies. Their action speaks louder then words. Currently 22 states have approved PACE programs but these are a small drop in the bucket. The Obama government needs to give strict instructions to all federal agencies to be more supportive of green energy in order to save PACE.