Pacific Housing & Finance Agency Approves PACE Financing Program

FOR IMMEDIATE RELEASE
San Bernardino, California, United States of America (Free-Press-Release.com) November 8, 2011 -- On May 5, 2010, Fannie Mae and Freddie Mac each issued advice letters to all lending institutions stating that mortgages for residences that also have Property Assessed Clean Energy (“PACE”) “loans” with first lien priority are not allowed under the Fannie Mae (“FANNIE”) and Freddie Mac (“FREDDIE”) standardized mortgage documents.

On July 6, 2010, the Federal Housing Finance Agency (“FHFA”), which was created by President George Bush to regulate housing finance, affirmed FANNIE and FREDDIE’s loan purchase restrictions for residences with PACE funding in the form of a Statement and Directive to FANNIE, FREDDIE, and the Federal Home Loan Banks (“FHLBs”). FANNIE and FREDDIE purchase home loans from banks and other lenders. It is estimated that FANNIE and FREDDIE own or guarantee approximately half of the nation’s residential loans. The advice letters and directive of the FHFA resulted in the temporary termination of residential financings in most of the PACE programs throughout the United States.

On July 14, 2010, the State of California, Sonoma and Placer Counties, the City of Palm Desert and the Sierra Club (“Plaintiffs”) filed an action entitled People of the State of California, et al v. Federal Housing Finance Agency, et al (Case No. 4:10-cv-03084-CW). In the action, the Plaintiffs seek declaratory and equitable relief under California law that: (a) PACE programs operate by assessments, not loans, and such assessments are valid; (b) liens that may result from PACE assessments, like those resulting from other types of assessments, have priority over mortgages; and (c) participation in PACE programs is compatible with, and not in violation of, Fannie Mae’s and Freddie Mac’s standardized mortgage documents.

The FHFA, Fannie Mae, Freddie Mac and their directors (“Defendants”) moved to dismiss all claims filed by the Plaintiffs in the action. On August 26, 2011, Defendants’ motions to dismiss were granted in part and denied in part, and Sonoma County's counter motion for a preliminary injunction was granted in part. The Court determined that Sonoma County did not demonstrate a likelihood that it will prevail on the merits to obtain the sweeping relief it initially requested. However, the court granted Sonoma County’s motion for a preliminary injunction requiring the FHFA, without changing its current policy, to proceed with the notice and comment process relating to its policy on PACE-related debts. Furthermore, the Court concluded that Plaintiffs have standing to have the matter heard. All of the Sierra Clubs causes of action were dismissed. The case is ongoing.

The Pacific Housing & Finance Agency (the “PFHA”), a California joint powers financing agency commenced its Property Assessed Clean Energy Program in early 2010. Due to the actions taken by FANNIE and FREDDIE, the Program along with other PACE programs throughout the United States, has moved slowly. However, on October 18, 2011, the PFHA approved its Water Efficiency and Property Assessed Clean Energy (PACE) and Job Creation Program (the “Program”) for financing the installation of energy efficient and water savings equipment on properties within its member cities and counties. The Program will primarily include the financing of commercial and industrial properties, multi-family residential properties and a small number of single family residential properties. On October 18, 2011, the PHFA approved assessment financing of up to $95,000,000 for Water Efficiency and Property Assessed Clean Energy improvement projects. Timothy Sabo and Alexis Crump of Lewis Brisbois Bisgaard & Smith, San Bernardino California are counsel to the PHFA for the financing of the improvement projects. For further information on the Program within your city please contact David Elder, Executive Director of the PFHA at (916) 803-0521.

Alexis Crump     Alexis Crump of Lewis Brisbois     fannie mae     freddie     freddie mac     pace     The FHFA     Timothy Sabo