1. PACE and the Path Forward
Annie Henderson | September 16, 2010
2. PACE: Simple, Effective Tool
City or county Property owners Proceeds from Property owner
creates type of voluntarily sign-up PACE repays bond
land-secured for financing and bond or other through property
financing district install energy financing provided tax bill
or similar legal projects to property owner (up to 20 years)
mechanism to pay for energy
project
3. Key Benefits for Cities & Counties
Helps meet Tax neutral and Promotes
energy and no exposure to local jobs
climate goals General Fund
4. Key Benefits for Property Owners
Saves money Not based on Repayment
on utility bills personal credit transfers to
new owner
5. “
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.
7. 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”
8. 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 6th 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.”
9. Impacts on PACE
Active and planned PACE programs on hold around
the country
Commercial PACE programs face uncertainty
11. 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 5th Fannie Mae/Freddie Mac letters and July 6th 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.
12. 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 filed by Babylon, Sonoma County
and Sierra Club
13. 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
14. 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 to get done this year
How to help
– Sample resolutions and other materials at: www.pacenow.org
– State/Local Governments
Adam Byrnes, adam@renewfund.com, 510-350-3733
15. Solutions for the Interim
CEC is proposing a clearinghouse of finance options
that will include secured and unsecured products
17. The Program
• State‐wide energy and water efficiency and renewable
energy genera7on retrofit program for single‐ and
mul7‐family residen7al and commercial buildings
• Collabora7on between Energy Commission, Public
U7li7es Commission, u7li7es, local governments and
private sector
• One‐stop resource for informa7on on building retrofit
benefits, financing and incen7ves, finding a qualified
contractor, workforce training and home energy
ra7ngs
• Coordinates federal, state, u7lity and local government
retrofit program outreach, incen7ves and contractor
and par7cipant qualifica7ons
• Creates a founda7on for AB 758 and Home Star
18. Energy Upgrade California Financing Program
• Administered by California State‐wide Community
Development Authority
• Compe77ve solicita7on will be offered for interested
financial ins7tu7ons offering residen7al and
commercial retrofit loan products
• Low rates expected as the program will offer standard
underwri7ng, comprehensive program roll‐out
(contractor qualifica7on, quality assurance, etc.) and
bundling of State‐wide building stock
• Offered State‐wide through Energy Upgrade California
web‐site applica7on, subsidized with interest rate
buy‐down and loan loss reserve in leadership coun7es
that commit local resources
