Mortgage questions halt solar upgrade funds (Sacramento)

Placer County has been forced to halt an estimated $1.5 million in residential remodels for solar panels or other energy-efficiency upgrades after federal authorities questioned whether the financing method violates mortgage rules.

The underlying dispute goes well beyond Placer County.

State officials say it has put a statewide damper on what’s known as Property Assessed Clean Energy, or PACE, programs — a new concept touted as an effective way to reduce household and commercial energy consumption.

The county’s program, which launched in March, was one of the first PACE programs in the state to be up and running and had received applications, though it hadn’t yet distributed funds. Others that had been ramping up also are in limbo, including a Sacramento County pilot program backed by stimulus funds that plans to offer $16.5 million in energy-efficiency upgrades.

These programs work by offering property owners funds up front for approved energy-efficiency upgrades. The money is paid back with interest through a property tax assessment over an agreed period of time, up to 20 years under Placer County’s program. The assessments stay with the property if it is sold.

Everything seemed fine until last month, when federal government-sponsored enterprises Fannie Mae and Freddie Mac issued letters suggesting these arrangements could violate their rules. Officials say the agencies are supportive of energy initiatives but claim there are deep concerns with the way some of the programs are set up, including Placer County’s.

Fannie and Freddie purchase mortgages from lenders to free up lending capital and have an interest in about half of the country’s residential mortgages.

The two sides also disagree over whether there had been tacit approval of these programs.

“This really hit us out of the blue,” said Janill Richards, a supervising deputy attorney general in Jerry Brown’s office. “Last year they indicated they were fully supportive of PACE programs here in California.”

Read the full story in the Sacramento Business Journal.