EmPowerSBC, a program designed to help residents improve energy efficiency in homes and businesses for less money, is on hold pending resolution of a dispute over the impact of such programs on lending practices.
On July 13, the Santa Barbara County Board of Supervisors passed a resolution barring the county from accepting applications for the program from residential properties, or providing funding, until a decision is made at the federal level on how building project financing is
classified.
EmPowerSBC is one of more than 20 county Property Assessed Clean Energy (PACE) programs in California. Created by the federal stimulus package, PACE programs are designed to kick-start construction jobs by providing up-front financing for “green” building projects.
If and when the program is implemented, homeowners would receive low-interest loans of up to $75,000 for improvements such as attic and wall insulation, HVAC systems, and low-flow showerheads, while businesses could have access to as much as $250,000. Property owners would then be billed on their property tax statements over a period of five to 20 years, depending on the type of project.
Under state law, PACE project costs are classified as tax assessments, superseding existing mortgages. Mortgage lenders Fannie Mae and Freddie Mac dispute the classification, designating them as loans subordinate to mortgages.
On July 6, the Federal Housing Finance Agency released a statement siding with the lenders and effectively shutting down PACE programs nationwide. The statement cited as concerns the absence of underwriting standards and the lack of solid criteria in determining a project’s value.
Santa Barbara County Community Development Specialist Angie Hacker said the county’s resolution would have only a slight effect on emPowerSBC because the program has yet to be fully implemented.
“We’re expecting a little bit of a delay while these issues get resolved, but we’re told the next few weeks will be very active and legislation in Congress will probably happen very quickly,” she said. “We’re remaining optimistic.”
Federal and state governments are scrambling to resolve the issue before time runs out. In Congress, Rep. Michael Thompson (D-CA) on July 15 introduced HR 5766, a bill that would revise underwriting standards for federal lenders, ensuring PACE programs could continue.
California Attorney General Jerry Brown also responded. On July 14, Brown filed a federal lawsuit against Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, accusing the entities of obstructing PACE programs. In the lawsuit, Brown asks the court to require mortgage lenders to recognize the programs as valid tax assessments.
“As the nation struggles through the worst recession in modern times, California is taking action in federal court to stop the regulatory strangulation of the state’s grass-roots program that is spreading across the country,” Brown said in a press release. “Fannie Mae and Freddie Mac received enormous federal bailouts, but now they’re throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy, and boosts clean energy.”
Julia Levin, special assistant attorney general in Brown’s office, said Brown filed the suit as a last resort after conversations with the lending institutions and President Barack Obama failed to bring an end to the debate.
“We think the law is quite clear here and the consequences for the impact of the agencies’ decision is very significant and detrimental to California,” Levin said. “With the hundreds of millions of dollars in stimulus funds and matching funds from state local and private persons, they could be creating tens of
thousands of additional jobs. This is a really
important program to re-launch as quickly as possible.”
Levin said the issue must be decided in the next few weeks, before states and local governments are forced to shift stimulus funding to other programs or risk losing the money altogether. According to the attorney general’s office, California could miss out on more than $150 million in funds as a result of the FHFA and lenders’ decision.
According to the county, emPowerSBC, if implemented, would create 900 new jobs and create an economic growth of $160 million by 2020.
This article appears in Jul 22-29, 2010.