The Federal Housing Finance Agency (FHFA) on Tuesday essentially put a halt to property assessed clean energy (PACE) financing for home retrofits and renewable energy projects in the U.S.
The Agency, which oversees the lending activities of U.S. mortgage giants Fannie Mae and Freddie Mac issued guidance to lenders across the country stating that PACE programs are risky and inadvisable.
The guidance reasserts a position taken by Fannie and Freddie in May.
PACE programs have been spreading rapidly across the country as a way to encourage homeowners to perform home energy upgrades without prohibitive upfront costs. The projects instead would be paid for with local bonds and assessed as liens on home properties.
But FHFA said in the case of default, the liens would trump the bank mortgage, meaning banks would be at risk of losing more money.
Alfred Pollard, general counsel for the FHFA, told the San Francisco Chronicle: "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."
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