Federal officials may have to tweak property assessed programs or financing rules
By Bob Berwyn
SUMMIT COUNTY — A new local loan program aimed at financing energy efficient upgrades might hit a temporary snag, as mortgage underwriter the Federal National Mortgage Association — or Fannie Mae — recently issued a letter suggesting it won’t accept notes with energy project loans attached. Read about the local energy loan program here.
Summit’s program, like similar programs in 19 other states, provides up-front money for energy improvement projects, to be repaid with a special assessment on property tax bills. By law, those assessments have senior lien status — and that’s what Fannie Mae says it won’t allow. Read the Fannie Mae notice and the response in a Scribd.com window at the end of this story.
“The terms of the Fannie Mae/Freddie Mac Uniform Security Instruments prohibit loans that have senior lien status to a mortgage,” Fannie Mae senior vice president Marianne Sullivan wrote in her May 5 letter to single-family sellers and servicers. “Fannie Mae supports energy-efficiency initiatives, and is willing to engage with federal and state agencies as they consider sustainable programs to facilitate lending for energy-efficiency home retrofits, while preserving the status of mortgage loans originated as first liens.”
The solution is to get them to rescind that letter,” said Dylan Hoffman, Pitkin County energy program manager. National advocates for property assessed clean energy programs are already working on the issue, firing off a letter to Vice President Joe Biden the same day the Fannie Mae guidance was released.
The loan guidance puts scores of programs across the country at risk, and could result in job losses if they’re shut down, PACE founder Jeffrey Tannenbaum wrote, asking the administration to rescind or amend the letter to protect homeowners in communities with those programs.
Hoffman said the Department of Energy is working on some guidelines that could help clarify the situation, which looks to boil down to a conflict between priorities among different federal agencies.
“No one has shut the doors on the programs. They just need some tweaks,” Hoffman said.
Assistant Summit County manager Thad Noll said state officials are working on a response. He said he doesn’t think the Fannie Mae letter will affect the local program.
He said the program does put the local energy loan ahead of other debts, but that’s a financing tool that already used commonly to help pay for special improvements. For instance, the Summit Estates subdivision recently formed an improvement district to pay for road improvements.
Just like with the energy loans, the county borrows the money to pay for the work up front, contracts to have the work done, then collects the money with a property tax assessment in a mechanism that’s authorized under state law.
Noll said he’s not sure why or how the energy loan program is any different, other than the fact that it’s aimed at individual homeowners rather than for a local improvement district.
The national energy loan advocates are making the same argument, claiming that financing for energy improvements are not loans in the traditional sense, and that they should be treated like any other special assessment attached to a property.