If the report below is true, this overturns a long held position that virtually shut down PACE ambitions during the Recovery Act, and frankly setback residential energy policy a decade. Even though we may now be back on track, billions were wasted in both public and private investment, and many early private companies failed when the promise of PACE financing for all disappeared due to FHFA's resistance to PACE the first time around.
I am writing to inform you that FHFA is not prepared to change its position on California's first-lien
PACE program and will continue to prohibit the Enterprises from purchasing or refinancing mortgages
that are encumbered with first-lien PACE loans.
- Snip from May 1, 2014 letter from Melvin L. Watt Director of FHFA to Governor Brown of CA
According to a report in Asset-Backed Alert the Federal Housing Finance Agency (FHFA) has reached an agreement that would allow Fannie and Freddie to buy mortgages for homes that have a PACE assessment, so long as lenders agree to repurchase any loans that default. Apparently, while the agreement has been struck, FHFA has yet to officially rule - but this is still huge progress!
Residential PACE in California has been back in action in "pirate" form through the HERO program in Southern California (run by Renovate America) for the last few years, and has over $250 Million in funded projects under its belt, and an extremely successful securitization. The Sonoma County Energy Independence Program (SCEIP) has also been continuing to move forward with residential PACE, though not at the same volumes as HERO. SCEIP and HERO just thumbed their nose at FHFA and essentially saying, 'this is a local issue, we are just going to prove it in the market.'
Earlier this year, California at large went back into the Residential PACE business, with the Governor establishing a loan loss reserve through California Alternative Energy Advanced Transportation Financing Authority (CAEAFTA).
Now in addition to Renovate America and the HERO program, Renewable Funding is leveraging the California First network that already covers 2/3 of the population of the State, and has been actively rolling out residential PACE for at least the last quarter. AllianceNRG which is a partnership between Counterpointe Energy Solutions, Deutsche Bank, and Leidos Engineering is also becoming active in residential PACE in California.
All in all, this is great news for energy efficiency and renewable energy in the residential sector, and we thank FHFA for coming to its senses and recognizing the great benefit of PACE as a way to allow homeowners to make improvements to their homes that create real cash-flows and lasting value.
Given the massive energy and carbon embodied in America's 128 million existing homes, getting residential PACE back on track is a critical step forward towards local job creation and a clean energy economy.
Better late than never!