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On PACE Again?


  09:02:00 am, by Jim Jenal - Founder & CEO   , 593 words  
Categories: Solar News, AB 811/PACE/LACEP Funding


UPDATE: The bill was indeed introduced as planned, it is H.R. 2599.  You can follow its progress via OpenCongress here.

After having been left for dead by federal regulators, PACE - Property Assessed Clean Energy funding for solar power and energy efficiency projects - is making a comeback thanks to bipartisan (Yes!) legislation gaining momentum in the House.  You can help get this important legislation passed by contacting your representative - details after the jump.

First some background.  PACE is a program that allows local governments to sell bonds to finance residential property improvements in the form of solar power installations and energy efficiency retrofits.  The property owner receives the money for the project and pays it off by way of a property tax assessment on the parcel that “runs with the land” - that is, new owners purchase the property with the assessment.  Twenty-seven states - including California - had passed enabling legislation and the solar industry in particular was extremely excited about the prospect of an inexpensive funding mechanism for residential solar.

But last summer, Fannie Mae and Freddie Mac blocked the programs by claiming that the senior lien status of PACE assessments created “safety and soundness” concerns for the mortgage industry.  As a result, no mortgage backed by Fannie or Freddie could participate in PACE without risking default - effectively stopping the PACE program in its tracks.  Early legislative attempts to fix the problem dissolved in election year strife and the program really did seem dead.

Fortunately, that appears to be changing, thanks to the hard work by folks over at Vote Solar, PACE Now, and a bipartisan group of legislators including two from California: Mike Thompson (D-CA1) and Dan Lungren (R-CA3).  Their proposed legislation - the PACE Assessment Protection Act of 2011 - would do the following:

  1. Undo the damage: Rescinds 2010 guidance from FHFA, OCC, Fannie, Freddie and affirms validity of assessments. Prohibits discrimination against homeowners and communities with PACE.
  2. Resolve the legal question: Defines a PACE assessment as an “assessment,” not a “loan.”
  3. Limit (eliminate) risk to Fannie/Freddie: Establishes national program standards: underwriting criteria, consumer protections, qualifying improvements, qualifying contractors

That last point is really important.  Check out this graphic:

PACE program requirements

To overcome the objections that somehow PACE-funded projects increased the risk of default - the only legitimate basis for an objection from the mortgage industry including Fannie & Freddie - the legislative requirements guarantee that homeowners who participate are on a sound financial footing in terms of home equity, limitations on the cost of the project and the requirement for proof that the project will pay for itself over the lifetime of the assessment.

These are sound requirements and - as the graphic demonstrates - more than two-thirds of all homes in the U.S. could qualify for the 15% equity requirement.  (It is worth noting, however, that this requirement eliminates from the program most recent home buyers who purchased during the boom years of the housing market.  Given that the data overwhelming shows that PACE programs actually lower the risk of mortgage default, it is most unfortunate that this equity requirement is deemed necessary to get the legislation moving.)

The bill is to be introduced at a joint press conference on Wednesday, July 20th (after that a bill number will be assigned).  Given that hope for passage will decline if the bill gets bogged down in election year politics, it is important for the legislation to move this year.

That is where you come in - please contact your Representative NOW and encourage them to co-sponsor this legislation and to vote for it in the House.  We will keep you posted on the measure’s progress.


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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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