Mortgage Giants Silence Energy-Saving Program

An eco-friendly financing program that the White House believes would help the environment, save homeowners energy and create thousands of jobs has been put on hold after Fannie Mae and Freddie Mac deemed the plan to be risky and the Federal Housing Finance Agency (FHFA) agreed.
The FHFA, which oversees the two government-backed mortgage houses and the 12 Federal Home Loan Banks, this week put a halt on Property Assessed Clean Energy (PACE) financing, which assists homeowners in making energy-saving upgrades without dealing with upfront costs.
Let me explain the green retrofit program: Through PACE, cities issue municipal bonds, then lend the proceeds to homeowners to finance solar and energy-saving improvements that would cut their water and energy use, sometimes up to 40 percent.
The loans are paid back over a 20-year period through an annual assessment on the homeowner’s property tax bill.
It seems to me like Fannie Mae, Freddie Mac and the FHFA believe the biggest issue is that paying back the PACE loan takes precedence over the mortgage loan. So, in cases of default, the bank could lose even more money.
But PACE proponents say that the savings in energy costs will equate to the amount of annual payback, so no new debt is formed while energy is saved.
Still, Fannie Mae and Freddie Mac, who back close to half of all U.S. mortgages, issued a letter in May implying that they will not allow their mortgage holders to participate in the PACE program.
This week, the FHFA officially put the program on hold until local, state and federal governments figure out a way to get Fannie Mae and Freddie Mac paid before homeowners pay back PACE.
After all, it’s just the environment we’re talking about.