Last week, the state of California filed a lawsuit against mortgage giants Fannie Mae and Freddie Mac. California’s Attorney General, Jerry Brown, hopes the legal action will realign the momentum of the Property Assessed Clean Energy (PACE) financing program. Earlier this month the Federal Housing Finance Agency (FHFA) instructed the mortgage lenders to avoid homes or tighten lending standards in geographies with PACE financing in place.
The lawsuit filed claims that the FHFA violates California law, which approved the PACE programs, and “severely hampers California’s efforts to assist thousands of California homeowners to reduce their energy and water use, help drive the state’s green economy, and create significant numbers of skilled, stable and well-paying jobs.”
Additionally, the lawsuit states, “the actions of these government-sponsored, shareholder-owned private corporations have placed California’s PACE programs – and the hundreds of millions of dollars in federal stimulus money supporting them – at immediate risk while benefiting their own pecuniary interests.”
The FHFA’s response focused on the additional credit risks PACE programs could impose in the event of a mortgage default. The PACE financing structure puts the clean energy loans in a position ahead of the home mortgage. If a property were to go through a foreclosure process, the PACE loan would be paid off prior to the home mortgage.
In addition to the California lawsuit, representatives from the California Public Utilities Commission and the U.S. House of Representatives took action against the FHFA’s decision. Click here to see the full blog post from the New York Times.