Feds shut door on energy efficiency loan program, cites risks to lenders

In recent years, the government has shown strong support for any initiatives and programs that further energy innovation. But it seems there’s a limit to how much risk even the government is willing to take on because it recently pulled the plug on Property Assessed Clean Energy (PACE). That’s made many supporters angry because with PACE, they were able to afford green energy installations by breaking up payments over 20 years.

Local governments issued bonds which generated cash for home and business owners seeking to build out energy improvements in their home or business. Property owners would then pay down the government loan over 20 years from a yearly tax assessment. Theoretically the tax assessment would stick with the property even if it changed hands to a new owner, assuming deals like that survive negotiations between buyer and seller.

That means if a new potential buyer dislikes the added tax assessment, they may demand a lower price and the lender loses out on the difference. Also tax assessments take priority over any mortgages on a property which poses another vein of risk for lenders.

Still, supporters of the program highlight the additional value their homes gain by having efficient energy devices installed. They also point out that paying off any taxes owed on a property would clear the way for any lenders faced with a foreclosure to proceed, and the added value from energy efficiencies would more than make up for price cuts in negotiations.

Feedback from a participant in PACE: "we've found that it has made a huge difference in our winter utility bills. Our gas usage dropped by half." Via NPR.

Supporters are fighting to keep the program alive and in the meantime they’re using other lenders. Fannie Mae and Freddie Mac might be sitting this one out though.