Home Energy Program Stalled By Federal Regulators

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(Host) An innovative program for helping homeowners finance energy improvements has been stymied by federal mortgage regulators’ concerns.

The program is called PACE, or Property Assessed Clean Energy.

VPR’s Susan Keese has more.

(Keese) PACE programs allow homeowners to borrow money for energy improvements from specially created tax districts.

Homeowners then repay the loans over time through an assessment on their property taxes.

Peter Adamczyk of the Vermont Energy Investment Corporation has been helping Vermont towns plan PACE districts.

He says many people know they’re spending too much on energy, but can’t afford the upfront costs of solar panels or efficiency upgrades. Or they don’t expect to live in a house long enough to realize the payback.

Adamczyk says with PACE financing, the assessment stays with the property if the house is sold, and the new owner takes over the payments.

(Adamczyk) "So if I’ve spent $10,000 on insulation and air sealing and a new furnace and my energy bills have dropped $2,000 a year and the assessment is for example $1,000 a year, you would be very happy to pay that assessment since you’re enjoying the energy benefits."

(Keese) Adamczyk says five Vermont towns have voted to create PACE districts and about 30 were in various stages of investigation or planning.

He says the program has the support of the Obama administration AND the U.S. Department of Energy.

(Adamczyk) "So it came as all the more surprise that FHFA… whose director is appointed by the president, came out against it."

(Keese) Adamczyk says PACE has been stopped in its tracks by the Federal Housing Finance Agency, which regulates the mortgage lenders Fannie Mae and Freddie Mac.

The agency is warning that PACE could add to the insecurity of the nation’s mortgage markets by changing the conditions of loans that have already been made.

The FHFA’s objection is about the priority of which lender would be paid first if there’s a foreclosure. Under PACE, mortgage loans rank AFTER the energy program.

Adamczyk says changing the guarantees for lenders would mean higher interest rates that would defeat the purpose of PACE loans.

But some Vermont towns are moving ahead anyway.

(Tillinghast) "I think we have a wonderful opportunity … to show a good example of how this could be done in the country where PACE programs have really been stopped cold."

(Keese) Tig Tillinghast chairs the select board in Thetford, one of four Vermont towns which was awarded a federal stimulus grant to plan a PACE district.

Vermont legislators authorized PACE districts in 2009. But Tillinghast says they left details to individual towns.

(Tillinghast) "Which means that as we do go about filling in those details, we can create PACE districts in such a way that they avoid all the problems that the …FHFA have stated that they’re worried about."

(Keese) Tillinghast says Thetford has already earmarked some of its $24,000 planning grant to start a fund that would cover losses. That’s designed to provide an extra layer of security, and possibly address regulators’ concerns.

Another resolution may come through the courts, because some states that already have PACE programs have sued.

For VPR News, I’m Susan Keese.

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