FHFA faces another lawsuit over PACE program
The Natural Resources Defense Council has sued the Federal Housing Finance Agency and the Office of the Comptroller of the Currency claiming the agencies illegally halted the Property Assessed Clean Energy program, known as PACE. In the lawsuit, filed in the Southern District of New York, the environmental advocacy group claims the FHFA stopped the program without following proper procedure when it directed government-sponsored entities Fannie Mae and Freddie Mac to suspend participating in the green-energy financing program a few months ago. PACE is designed to stimulate the economy and promote energy independence by assisting homeowners and small businesses with financing to make their properties energy efficient. In early July, the FHFA, which is the conservator of the two GSEs, issued warning letters not to accept PACE loans or assessments. This led to lawsuits from states and municipalities that had already begun implementing the program. The FHFA doesn't want Fannie and Freddie to accept loans under the program because a priority lien on a property would take precedence over a first mortgage, which the GSEs prohibit. But the NRDC believes the federal regulators are impeding homeowners from energy efficiency upgrades and renewable energy projects that could help lower electricity bills. "It defies common sense that the federal government is blocking programs that could create jobs, jump-start our economy, put money in homeowners’ pockets and fight climate change at the same time," according to Katherine Kennedy, energy counsel at the council. "Instead of shutting them down, the federal government should help these programs grow." Both Fannie and Freddie say they support energy-efficiency initiatives but simply cannot accept home loans that have liens senior to the first mortgage. FHFA Acting Director Edward DeMarco said in July that the agency plans to"defend vigorously its actions that aim to protect taxpayers, lenders, Fannie Mae and Freddie Mac." "Homeowners should not be placed at risk by programs that alter lien priorities and fail to operate with sound underwriting guidelines and consumer protections," DeMarco said then. "Mortgage holders should not be forced to absorb new credit risks after they have already purchased or guaranteed a mortgage." Write to Jason Philyaw.