A nation-wide Property-Assessed Clean-Energy (PACE) bond program has been proposed, but not without its critics.
As you may recall, PACE bonds are a new financing mechanism that can be used to retrofit homes and commercial buildings, or install renewable energy:
"PACE 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). OWNERS 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 used to retrofit both commercial and residential properties."
The White House is now pushing its own PACE bond program:
"Under the program, homeowners would borrow money from their local government to pay for energy improvements—from high-efficiency furnaces that cost a few thousand dollars, to solar-panel systems that can cost more than $30,000. They would then repay the loan over 15 to 20 years through a special assessment added to their property-tax bills. Local governments would get the funding by selling municipal bonds to investors
This debt would be senior to existing mortgage debt, so if the homeowner defaults or goes into foreclosure, it would be repaid before the mortgage lender gets any money. While property-tax assessments are usually senior to existing property debt, cities have traditionally used their assessment authority for community-wide improvements like sewers and roads—not for upgrades that homeowners elect to make on their own homes."
As with any new governmental program, there are critics of the PACE program. The critics of the White House’s PACE program are opposed to the first-lien rights:
"Alfred Pollard, general counsel for the mortgage companies’ regulator, the Federal Housing Finance Agency, said he was worried about the problems that a first-lien, or first-in-line, loan could create. ‘The goal of enhancing energy efficiency, which we share, should not overcome the need for prudent underwriting,’ he said."
There appears to be no easy solution to appease the PACE bond critics. Government agencies are comfortable pushing PACE bond programs for the same reason that banks and mortgage companies are uncomfortable with the programs: the agencies take first-lien rights.
Do you see a resolution?
PACE NOW (PACEnow.org)