Policy Updates

by Matt Golden on July 19, 2010
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HOME STAR endorsements continue to grow, now includes U.S. Chamber of Commerce
Support continues to grow for the bipartisan Home Star Energy Retrofit Act of 2010, which passed the House of Representatives in May and now has 25 co-sponsors in the Senate. Meanwhile, the United States Chamber of Commerce has added its highly influential voice to the growing call for swift passage of the HOME STAR legislation; in a letter to Senate leaders on June 22, R. Bruce Josten, the Chamber’s Executive Vice President for Government Affairs, said:

The U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than three million businesses and organizations of every size, sector, and region, supports S. 3434, the “Home Star Energy Retrofit Act of 2010,” which would provide a solid framework for a worthwhile, incentive-based program that would create American jobs while saving energy.

The home retrofit industry is a uniquely American industry: the vast majority of windows, doors, and insulation for these retrofits are manufactured in the United States. Since 2006, this industry has been decimated, with more than 650,000 jobs lost. The incentives provided by S. 3434 would create good, living-wage jobs for American workers, while providing homeowners the ability to make a substantial dent in their overall energy costs.

The Chamber supports S. 3434 and hopes this important legislation is considered by the full Senate in the near term.

Visit www.efficiencyfirst.org/home-star to learn more about the proposed HOME STAR incentive program, and about how you can join the trade association Efficiency First and other national organizations in supporting this important legislation.

A free Webinar recording at www.utilityexchange.org/webinar/20100701 will help your shop get ready for HOME STAR’s performance-based GOLD STAR incentive with a road map to BPI accreditation.

PACE programs stalled by federal mortgage regulators
Property Assessed Clean Energy (PACE) financing programs across the country have been suspended following recent actions by Fannie Mae and Freddie Mac, the government-sponsored corporations that back most home mortgages in the United States. The problem is that the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, doesn’t like the idea of PACE liens taking precedence over mortgages in foreclosure proceedings—despite the fact that energy improvements typically increase the value of a home, and the potential financial impact on the mortgage industry is comparatively small.

PACE programs, which allow property owners to pay for a wide range of energy improvements with loans attached to their property tax assessments, have been lauded as an innovative, transformative financing model for energy efficiency and renewable energy projects. But in May, Fannie and Freddie started spreading the word among commercial lenders that properties with energy improvement liens that are senior to mortgage debt would not meet FHFA underwriting standards. The FHFA confirmed the new policy on July 6 when it issued guidelines that have effectively made it impossible for homeowners to get approval for mortgages on homes with pace liens attached. (A grandfather cause exempts PACE loans issued before July 6.)
That leaves homeowners and contractors caught in the crossfire as most PACE programs have stopped making loans, projects are being suspended, and $150 million in federal stimulus funding allocated to PACE financing is being diverted to other programs. However, at least one prominent PACE program—the Sonoma County Energy Independence Program (SCEIP) in Northern California—has announced that it will continue to issue energy improvement loans in defiance of federal mortgage regulators, “predicated on the SCEIP providing full and complete disclosure about program participation to any potential applicants and ensuring the public fully understands the consequences of participation.”

PACE advocates around the country are pushing for a judicial or legislative solution to the impasse. California Attorney General Jerry Brown has filed suit in United States District Court seeking reversal of the FHFA ruling, and on July 15, Rep. Mike Thompson and 29 other members of Congress introduced the PACE Assessment Protection Act of 2010, which would force Fannie and Freddie to adopt underwriting guidelines that support PACE lending. But for now at least, most homeowners will have to find other ways to finance energy improvement projects.

PACE Programs Shut Down by Loan Giants

by Shana Fong on July 7, 2010
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Discouraging news on the status of PACE financing began to leak out of Washington this holiday weekend with reports that the Obama administration has failed to persuade the Federal Housing Finance Agency to allow Fannie Mae and Freddie Mac to accept mortgages on properties with PACE liens attached. Late Friday, PACE financing pioneer Cisco DeVries of California-based Renewable Funding circulated an e-mail message to PACE advocates stating that:

Unfortunately, the discussions between the Obama Administration and the FHFA have not been successful. DOE and the White House have informed us that the senior lien — regardless of how structured, accelerated, or insured — is not acceptable to the regulators. New guidance from Fannie and Freddie to this effect is due out soon. DOE has begun notifying ARRA grant recipients that they probably want to start moving their grant funds away from residential PACE.

A subsequent report in the New York Times confirmed that Cathy Zoi, the DOE’s Assistant Secretary for Energy Efficiency and Renewable Energy, had contacted DeVries to say that “the administration needed to begin contingency planning on what to do with stimulus funding for PACE.” The Times also quoted Ben Pearlman, a county commissioner in Boulder, Colorado, who received a similar call from Secretary Zoi saying that “in light of the circumstances we should look at other ways of financing energy efficiency with the stimulus money.”

Although Fannie, Freddie and the FHFA have yet to issue formal guidelines regarding PACE liens, local governments across the country are freezing their property-assessed lending programs pending government action that would clear the way for PACE lending to resume.

Meanwhile, Rep. Barney Frank, chairman of the House Financial Services Committee, and Rep. Henry Waxman, head of the House Energy and Commerce Committee, have sent a letter urging administration officials to “quickly identify, agree on and publish guidelines that would allow PACE financing programs to continue while ensuring that both taxpayer and private mortgage investments are protected.” And the Washington Post has cited an anonymous source within the Department of Energy saying that the DOE is “seeking protection for homeowners who have already taken on PACE financing.”

Minimal financial impact: Earlier on Friday, before these latest reports began to surface, the Times‘ Todd Woody posted a thought-provoking analysis suggesting that the potential liability related to PACE liens would be tiny:

Putting aside whether such liens are any different from the property tax assessments commonly used to finance municipal improvements, how big a potential liability would Fannie and Freddie face?

Not very big, according to an analysis by the California attorney general’s office.

In a June 22 letter to the Federal Housing Finance Agency, which oversees Fannie and Freddie, Ken Alex, a senior assistant attorney general, cited the example of a homeowner who obtains $15,000 in financing from a PACE program to pay for a solar array and energy efficiency upgrades.

With a 7 percent interest rate and a 20-year payback term, the annual assessment on the homeowner’s property tax bill would be about $1,500.

“At the time of foreclosure for failing to pay the mortgage, it is likely that at most, one PACE assessment of $1,500 would have achieved priority lien status,” Mr. Alex wrote.

“This exercise suggests that with a portfolio of Fannie/Freddie mortgages that have PACE liens, assuming a high foreclosure rate of 10 percent, PACE seniority would average $150 per home,” he added. “Using a more reasonable foreclosure rate of 5 percent, average PACE seniority per home would be a mere $75.”

More on this topic:

The Progress of PACE

by Shana Fong on May 3, 2010
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PACE (Property Assessed Clean Energy) financing programs are expanding rapidly throughout the country. By the end of the year, 11 counties in California alone will have a PACE program. According to industry expert and Recurve founder Matt Golden, that means 60% of Californians will be living in a PACE district.

As a reminder, a PACE bond is a bond where the proceeds are lent to commercial and residential property owners to finance energy retrofits (efficiency measures and small renewable energy systems) and who then repay their loans over 20 years via an annual assessment on their property tax bill. PACE bonds can be issued by municipal financing districts or finance companies and the proceeds can be typically used to retrofit both commercial and residential properties.

The advantages of PACE programs include significant job creation, reduction in greenhouse gas emissions, lower energy bills and substantially reduced upfront cost for energy improvements, increase in property value, improved return on investment, and many more.

San Francisco Introduces Its Own Innovative Financing Plan for Energy Projects

by Shana Fong on February 9, 2010
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In January, I mentioned how innovative financing is changing energy in America. San Francisco residents can now share bragging rights with other progressive counties such as Berkeley and Sonoma – GreenFinanceSF has officially been signed into law! This innovative program is the nation’s largest PACE (Property Assessed Clean Energy) program to date, making $150 million in bonding capacity available to private property owners to finance water conservation, energy efficiency and renewable energy improvements starting in April. Learn more here: http://greenfinancesf.org/

In 2010, 200 local governments nationwide are expected to have administered programs based on the PACE model. Good ideas are worth spreading!

How Innovative Financing is Changing Energy in America

by Shana Fong on January 27, 2010
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Here’s a great post on Grist by Recurve friend and client Cisco DeVries, CEO of Renewable Funding.

In this article, Cisco discusses a shift in financing models for energy efficient improvements and renewable energy projects by funding them through loans attached to property tax. Dozens of states and municipalities, including several in the Bay Area such as Berkeley, Sonoma, and San Francisco, have already hopped on the bandwagon – thus demonstrating support for a public-private hybrid financing model that will achieve several goals at once: cutting energy use and carbon emissions, putting Americans back to work, and stimulating economic growth.

Green building trends in 2009

by Shana Fong on January 4, 2010
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2009 was a fantastic year for progress and support of green building. Some of our favorite green building trends of the year were:

  • The increase in net zero energy building. Check out the Palo Alto historic retrofit we did here: Palo Alto Net Zero
  • Energy efficiency retrofits finally get financing support. CA has set aside over $3 billion, most of which will come from utility rebates.
  • Property assessed clean energy loans (PACE) gain popularity and are implemented in several states and municipalities.

See Greentech Media’s Top Ten in Green Building in 2009.

Mayor Newsom announces San Francisco Sustainable Financing for Green Retrofits

by Shana Fong on December 16, 2009
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Mayor Newsom, Recurve founder Matt Golden, Assessor-Recorder Phil Ting, and others announce SF Sustainable Financing Program

Mayor Newsom, Recurve founder Matt Golden, Assessor-Recorder Phil Ting, and others announce SF Sustainable Financing Program

San Francisco Mayor Gavin Newsom announced on Monday that San Francisco is introducing legislation to help finance new residential and commercial energy efficiency and renewable energy projects. San Francisco Sustainable Financing Program (SF2) is modeled after similar programs adopted by cities such as Berkeley and Palm Desert, in which the loan for improvements is attached to the property, rather than the individual, and will be paid back through property taxes over the life of the financing.

San Francisco Sustainable Financing (SF2) Highlights:

  • Establishes a citywide “Mello-Roos” Special Tax District.
  • Residential and commercial buildings of all sizes will be eligible.
  • Some of the eligible upgrades include: insulation, replacing windows, upgrading heating systems; water efficiency upgrades—such as installing low flow toilets, potable water offsets, irrigation measures, storm water management improvements; financing will also be available for installation of renewable energy generation on buildings, such as solar arrays, solar water heaters and wind turbines
  • Program phases in a mandate of a whole home energy efficiency audit and the installation of energy efficiency upgrades before renewable energy generation improvements.
  • Private capital to fund the retrofits through Renewable Funding, LLC.
  • Program participants can deduct the interest component of their solar financing tax on their tax returns.
    Similar programs exist currently in Berkeley and Sonoma, and others are under development around the state, but San Francisco’s is the most aggressive and includes comprehensive water and energy efficiency improvements as well as renewable generation like solar.

According to Inhabitat, the genius of San Francisco Sustainable Financing is that it will leverage private market lending and available state and federal grant dollars to help home and business owners overcome the costs of green improvements without financial risk to San Francisco taxpayers. Up to $150 million has been set aside for this new program. This is different than cities with similar “repayment through property tax” solar and environmental improvement programs, where public or City investment dollars are used for financing instead.