FW: SF solar financing program
Chris Jones
Feds
pull plug on cities' green home loans
Robert Selna, Chronicle Staff
Writer
Wednesday,
July 7, 2010
San
Francisco's new, $150 million program to help property owners finance solar and
other energy-saving programs is all but dead, according to city officials, after
a federal agency announced Tuesday that the program and others like it across
the state are potentially risky and inadvisable for mortgage
lenders.
The programs have been widely
championed as a way to reduce greenhouse gas emissions and energy bills and to
create green jobs. Generally, the programs allow a property owner to obtain a
low-interest loan from local governments that are backed by bonds. The property
owner then repays the loan over 20 years through a tax assessment, which is
attached to the home, even if it is sold.
Several Bay Area cities
embraced the energy retrofit plans, which originated in Berkeley and are made
possible by 2008 state legislation. Fourteen additional California counties
planned to embark on similar endeavors later this year and cities and counties
in other states have pursued similar proposals.
The Department of Energy also
has said that millions of dollars in stimulus funds should go to installing the
energy-saving systems under the programs, which are referred to as Property
Assessed Clean Energy, or PACE.
San
Francisco launched its version of the
idea, called GreenFinanceSF, with great fanfare in April and $150 million in
financing, making it one of the nation's most ambitions
efforts.
Loans
into liens
The problem, according to the
Federal Housing Finance Agency, is that the local loans attach to the properties
as liens if they are not paid off and those liens, because they are property
taxes, trump banks for who gets paid back first from proceeds of a foreclosed
home. In a housing market that is - at best - recovering, the risk of home loan
defaults remains high and lenders do not want to risk losing more
money.
The FHFA oversees Fannie Mae
and Freddie Mac, which guarantee more than half of the residential mortgages in
the United States.
With the energy loans,
"you're talking about lending money to people when home values are going down,"
said Alfred Pollard, general counsel for the FHFA. "You can't just slap a first
lien on a piece of property and say that there's no risk to the lender,
particularly in this fragile market."
Pollard noted that in some
instances, local governments have issued energy-efficiency loans after the
existing mortgage loans had been made, and commonly did not consider the extra
strain on borrowers' ability to pay their debts.
Warnings
to lenders
In May, Fannie Mae and
Freddie Mac issued warning letters to lenders and loan servicers stating that
energy-related liens should not take priority over their mortgages. On Tuesday,
the FHFA called for a suspension in the energy lending programs and asked Fannie
and Freddie and Federal Home Loan banks to put safeguards in place to protect
themselves, including requiring that borrowers seek the lenders' approval for
the local loans and increasing income requirements on borrowers to account for
their additional debt obligations.
The FHFA statement did,
however, direct the mortgage backers, Fannie and Freddie, to honor the PACE
loans that already have been issued.
Pollard said that local,
state and federal governments need to come together to devise programs that
don't allow cities and counties to be repaid before Freddie and
Fannie.
Meanwhile, San Francisco has
had to halt its loans, and companies hired to administer them have been forced
to scale back.
State and federal officials
also have weighed in.
Gov. Arnold Schwarzenegger,
Attorney General Jerry Brown, New York Mayor Michael Bloomberg and some members
of Congress have written letters to the FHFA expressing
concern.
Stake
in the heart
Johanna Partin, director of
climate protection initiatives for San Francisco Mayor Gavin Newsom, said that
after the program was announced in April, the city saw a spike in residents
seeking energy audits, one of the first steps in obtaining a city loan. She said
that it was too early to tell how much interest there was in the program because
it had just begun, although it was expected to be high.
"This announcement from FHFA
today really puts a stake in the heart of our PACE program," said Partin. "And
it will have a very serious impact on the many jurisdictions that are
implementing or developing PACE programs."
E-mail
Robert Selna at rse...@sfchronicle.com.
This article appeared on page
A - 1 of the
San Francisco Chronicle