Cities and counties across the country have frozen their Property Assessed Clean Energy (PACE) programs in the wake of actions by the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac that have put a halt to the program.

Some news reports say that PACE is all but dead. Recently, Fannie Mae and Freddie Mac warned lenders that they would refuse to accept loans on buildings using PACE financing. Then, in a statement on July 6, the FHFA endorsed this view that PACE loans are risky.

Local governments across the country are voicing their opinion and taking action to try to save the PACE program. And California attorney general Jerry Brown filed a lawsuit in the United States District Court in Oakland, California, against Fannie Mae, Freddie Mac, and the FHFA.

"Following the decision by federal regulators to try and shut PACE programs down, there has been a remarkable response from cities, counties, states, Members of Congress, and others," says Cisco Devries, who helped develop the first PACE financing program in Berkeley, and is now president of Renewable Funding.  "With the introduction of both litigation and legislation, the door may be opening to resolve the issues with PACE and allow programs across the country to move forward."

Through the PACE program, local governments issue municipal bonds, then make low-interest loans to property owners for energy efficiency improvements. The loans are repaid through 20-year special assessments on property tax bills and secured through a lien. But On May 5, Fannie Mae and Freddie Mac, which buy and resell most home mortgages, notified lenders that such liens could not take priority over a mortgage.

PACE programs were thought of as one of the most promising tools available to local governments eager to bring new jobs, energy bill savings and environmental benefits to their residents. The Obama administration allocated $150 million in stimulus money to support the program, and about 23 states have passed legislation to authorize such programs.

Local governments across the country are voicing their opinion and taking action to try to save the PACE program. And California attorney general Jerry Brown filed a lawsuit in the United States District Court in Oakland, California, against Fannie Mae, Freddie Mac, and the FHFA.

Devries will discuss the future of PACE at an ICMA teleconference, “What’s Next for PACE Programs? Fannie and Freddie, Federal Fixes, Lawsuits, and More,” on July 28, 2010. Hosted by the ICMA Center for Sustainable Communities and the Climate Communities, this teleconference is provided FREE to local governments. Click here for more information.