California Wants Solar Program Back

Kurt Alexander -- Santa Cruz Sentinel

California Attorney General Jerry Brown filed suit Wednesday against Fannie May and Freddie Mac, claiming the mortgage giants have thwarted a home-energy improvement program that would have arrived in Santa Cruz County this fall.
The suit argues that opposition to the program by the mortgage companies - and a decision last week to not participate in it - has forced counties like Santa Cruz to suspend plans to finance home-efficiency upgrages, like solar panels and window insulation.
That position, said Brown at a press conference in San Diego, undermines California's efforts to boost energy savings and create green jobs.
Brown's suit was filed in a federal court in Oakland.
The program at issue, formally called Property Assessed Clean Energy or PACE, is a novel financing method that allows homeowners to pay for home improvements through a special property-tax assessment facilitated by the county.
Fannie May and Freddie Mac are cold to the idea because they fear homeowners who default on their mortgage would be obligated to pay the new tax assessment before making good on their home loan. The companies, with the blessing of the Federal Housing Finance Agency, say they'll no longer issue mortgages on properties that have PACE financing.
The two companies together own or guarantee about half the nation's mortgages.
Fannie May and Freddie Mac declined to comment Wednesday. But Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said California's energy program could put homeowners on shaky financial ground and increase the liability for the mortgage companies. He vowed to fight Brown's suit.
"Mortgage holders should not be forced to absorb new credit risks after they have already purchased or guaranteed a mortgage," DeMarco told The Associated Press.
The Federal Housing Finance Agency is also named in Brown's suit, which seeks to have the feds lift their directive to shun properties with PACE financing.
Santa Cruz County is one of 14 counties in CaliforniaFIRST, which would have been among country's largest renewable financing programs, coordinated by Santa Cruz-based nonprofit Ecology Action.
Though the position of Fannie May and Freddie Mac is likely to delay CaliforniaFIRST's planned launch this fall, coordinators say they're committed to making sure the program moves forward.
"There are still other financing mechanisms," said Margart Bruce, vice-president of Ecology Action's climate group. "It's analogous to if your car breaks down, there are other ways to get to work."
Bruce said while the preferred financing option remains the tax assessment, and she hopes Brown's lawsuit or possible Congressional action will force Fannie May and Freddie Mac to honor it, financing could also be offered through more traditional loans.
Other loans, though, don't have the ease and security that come with a property tax assessment, a debt that is passed on to the next homeowner should the property sell.
Supporters of the tax assessment, like Brown and Bruce, say the model comes with little risk to Fannie May or Freddie Mac.
CaliforniaFIRST got $16.5 million of federal stimulus funds earlier this year to get off the ground.
The program had planned for financing of up to $35,000 for homeowners and $75,000 for businesses, with interest rates around 7 or 8 percent over a 20-year term.
"We're going to start pulling out all the stops (to make sure this succeeds)," said Bruce.