I N · T H I S · I S S U E
Pondering the FHFA Position
Three of my meetings on the trep were about PACE, preparing for the PACE Solutions conference in early March.
PACE stands for Property Assessed Clean Energy financing -- a mechanism whereby cities or counties make money available to their residents for energy upgrades, and then are paid back through a property tax assessment. EcoMotion is particularly pleased to be involved in this conference, since PACE financing could enable many more of the kinds of projects we help develop and manage.
What happened to this most promising form of land-secured financing for energy efficiency and solar? It sprang forth with such great potential, and then was dealt a near-knockout blow by the Federal Housing and Finance Agency.
Assessments have been used by local governments for a century. Over 37,000 land secured assessment districts already exist and are a safe and familiar tool for municipal finance. But in late spring and summer of 2010, the FHFA issued advice letters to its mortgage lenders telling them not to buy mortgages encumbered by PACE liens.
Within months, many planned and fledgling residential PACE programs were abruptly terminated.
I began to dig in on the FHFA. Why did FHFA deliver a crippling blow to PACE? Its position is illogical: In a properly structured program, PACE savings are equal to or exceed the monthly payment for the improvement. Why had FHFA driven a deathly blow to the one form of assessment that actually helps the homeowner pay his or her mortgage?
Did FHFA act on its own or was it pressured from above, or externally? Did Tim Geitner strike down PACE “in mortal fear of repeat of the sub-prime market?” Were solar leasing companies blocking this new form of consumer empowerment? Was the FHFA edict a first attack on assessments? Is it, or is it not, a state’s right to define public benefits and to thus exercise its assessment options accordingly?
Could legal counsels in 24 states plus the District of Columbia have it all wrong? They’d been placing assessments on properties for years without concern from Fannie Mae and Freddie Mac.
So what was FHFA’s motive, or drive? Why couldn’t a win-win solution be crafted? Why had discussions of loan loss reserves and strict underwriting standards fall flat? Speculation focuses on its General Counsel, Alfred Pollard. He’s been called a “curmudgeon” and accused of “speaking with forked tongue.” One first-hand sense is that he has acted on his own, that he seems to enjoy the battle, the power, and the control. Could this be true?
If so, imagine the power of one man to shut down an industry, to stem tens of billions of dollars of investment in energy efficiency and renewable power. Imagine one man being able to curtail hundreds of billions of dollars of consumer savings over the life of the measures. Imagine one man holding back 100,000s of metric tonnes of carbon dioxide savings. Imagine one man making our country less secure due to dependence on foreign energy sources.
“Ted Flanigan?” A strong voice on the line in my office. “Yes,” I replied. “This is Al Pollard.” He was calling about our upcoming PACE Solutions conference.