He told reporters that America’s biggest mortgage lenders were “stubborn, unreasonable, and acting like East Coast bankers”. The conference call touted a change in direction by the FHA
, which will begin supporting a new loan program for household energy improvements.
The source of Brown’s frustration is the ongoing refusal of Fannie Mae and Freddie Mac to accommodate homeowners who use property assessed clean energy (PACE) to install energy efficiency upgrades on their homes. Sonoma County initiated the nation’s first countywide PACE program in 2009.
Since its inception, Sonoma County’s PACE program has funded residential energy-saving improvements worth more than $50 million. Owners repay the loans with interest over 10- or 20-year periods on their property tax bills.
Even though energy-saving devices provide significant savings on monthly utility bills, Fannie and Freddie refuse to purchase mortgages for homes with PACE upgrades. They’re resistant because the assessments, which are secured by a property tax lien on the home, get paid first in the event of a foreclosure. If a home is worth less than the outstanding balance on the PACE loan, the mortgage holder could suffer a significant loss.
To ensure that PACE loans don’t prevent lenders from recovering their investments, California has created a $10 million fund to cover foreclosure-related losses resulting from PACE liens. A similar mechanism will be applied to loans backed by the FHA
. During a foreclosure, any portion of the PACE loan that’s in arrears will be settled before the FHA
mortgage. The rest of the loan will be passed on to the next homeowner when the home is sold during a foreclosure sale.
Despite these measures, Fannie and Freddie refuse to budge, which helps explain Brown’s ill humor.
California Governor Jerry Brown has never been known to mince his words, and he was particularly vocal about his frustration with Fannie Mae and Freddie Mac during a recent White House conference call.