California sues feds over PACE (San Francisco)

Attorney General Jerry Brown on Wednesday sued mortgage giants Fannie Mae and Freddie Mac for blocking a California financing program for energy efficiency and renewable energy improvements.

The Federal Housing Finance Agency issued a letter July 6 confirming its position on Property Assessed Clean Energy — PACE — financing programs that allow homeowners to borrow against their property taxes to fund energy efficiency improvements.

Improvements are funded on the front end through local government bond sales that hold senior lien status — meaning bondholders would get paid back before any mortgage lender in the case of default.

But the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac and 12 Federal home loan banks, said its lenders will no longer buy mortgages that had PACE liens attached, which essentially killed the program for homeowners.

Brown said Fannie Mae and Freddie Mac have wrongly characterizing PACE assessments as loans that must be subordinate to their own mortgages.

“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 statement.

Almost half the counties in California have developed PACE programs or plan to start one, according to Brown’s office.

Read more in the San Francisco Business Times.