Homeowner loans for clean energy questioned

The Property Assessed Clean Energy Bonds program provides personal loan to homeowners, through the cities they live in. Intended to finance energy-efficiency upgrades and retrofits, these PACE loans are paid off as a part of the property taxes on a house. 3 other federal agencies, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac have all joined forces to try and remove these loans from the market.

Resource for this article: Federal agencies question clean energy bonds for homeowners by Personal Money Store

How PACE loans get money to homeowners

PACE loans are “bond-backed loans” that cities like San Francisco and New York administer. The homeowner applies for finance loans in order to make energy improvements to the house. Cities take these loans and sell them as bonds. Property taxes on the house are increased by the payment of the loan. The energy improvements, like solar panels or additional insulation, stay with the house — and so do the payments. This loan program helps homeowners discover personal payday installment loans that will help them make improvements to their home. In order to jump-start the programs, the federal stimulus package provided money to the cities.

How PACE loans are frustrating

If PACE loans are a way for cities and housing to improve and for the country to move toward energy independence, why are federal agencies like the Housing Finance Agency against them? PACE loans might threaten the ability of these other agencies to get paid. To make their money, a mortgage holder has to sell a house that goes into foreclosure. However, liens such as property taxes have to be paid before the mortgage lender gets any money. Because PACE loans are paid as part of property taxes, this means they get paid back before the mortgage lender if the mortgage goes into default.

The risk to PACE loans?

Officially, PACE loans are nevertheless a working program. The standards for mortgage payday installment loans programs where PACE is accessible, though, are being tightened. House Energy and Commerce Committee Chairman Henry Waxman and House Financial Services Committee Chairman Barney Frank have written a letter “urging officials to work together quickly to resolve the uncertainty surrounding PACE programs”.