FHFA Publishes Proposed PACE Rule
Homeowners may find it more difficult to obtain loans from their local governments for energy saving home improvements under a proposed rule issued by the federal agency responsible for managing government-sponsored lending institutions, such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
The proposal followed a flurry of legal activity that started in July 2010 when the Federal Housing Finance Agency (FHFA) issued an informal statement
warning of the risks PACE pose for mortgage investments. The statement effectively halted state PACE programs by causing enterprises such as Freddie Mac and Fannie Mae to completely avoid mortgages associated with PACE loans.
States, environmental groups, and other PACE advocates have filed
several lawsuits against the FHFA seeking injunctive relief which would have restarted the programs. In one such lawsuit, a federal district court issued an order
to FHFA to initiate a notice-and-comment rulemaking to offer guidance about how lenders should deal with PACE loans. The agency posted
the proposed rule in the Federal Register
on January 26, announcing it will accept comments through March 26, 2012.
PACE legislation, which has been adopted in 27 states, provides a way for homeowners to obtain funding for energy-efficient home improvements that would otherwise be cost prohibitive. Under the program, homeowners receive loans from the local government and repay them through annual supplemental property-tax assessments.