Skip to main content

Watt Reaffirms Ban on PACE Program Loans

Phil Hall
Jan 27, 2015

The head of the Federal Housing Finance Agency (FHFA) has upheld his predecessor’s decision that prevented the government-sponsored enterprises (GSEs) from buying mortgages connected to the Property Assessed Clean Energy (PACE) program.

In testimony presented today before the House Financial Services Committee, FHFA Director Mel Watt made a surprising inclusion of the PACE program in his update on the agency’s goals and activities. Five years ago, Acting FHFA Director Edward DeMarco suspended the agency’s involvement in the PACE program, which used property tax assessments for financing energy-efficiency systems and solutions.

DeMarco’s move created controversy–22 states and the District of Columbia had PACE programs in place, and the Obama administration unsuccessfully attempted to change DeMarco’s mind by providing the FHFA with a two-year reserve fund to guarantee against losses created by PACE program-related losses. California Governor Jerry Brown sued the FHFA to overturn its decision, and a 2012 ruling by a U.S. district court required that the FHFA complete formal "notice-and-comment rulemaking" on the issue. But a 2013 federal appeals court upheld the FHFA’s right to prevent the GSEs from buying loans involved in this program, and the FHFA made little further mention of the subject until Watt’s new comments.

“While FHFA is not opposed to energy retrofit financing programs that allow homeowners to improve energy efficiency, these programs must be structured to ensure protection of the core financing for the home and, therefore, cannot undermine the first-lien status of Fannie Mae and Freddie Mac mortgages,” said Watt in his congressional testimony. “Concerning certain energy retrofit financing programs, such as first-lien PACE programs, FHFA has reiterated that Fannie Mae and Freddie Mac’s policies prohibit the purchase of a mortgage on property that has a first-lien PACE loan attached to it. 

“This restriction has two potential implications for borrowers,” Watt continued. “First, a homeowner with a first-lien PACE loan cannot refinance their existing mortgage with a Fannie Mae or Freddie Mac mortgage.  Second, anyone wanting to buy a home that already has a first-lien PACE loan cannot use a Fannie Mae or Freddie Mac loan for the purchase.  In addition to aggressive enforcement of these existing policies, FHFA is continuing to evaluate or explore other possible remedies and legal actions to protect the Enterprises’ lien position.”

Watt added that his decision reaffirms the duties of the FHFA to “protect Fannie Mae's and Freddie Mac's rights, and [we] will aggressively do so.”

Jan 27, 2015
CFPB Reports Trends In Financial Assistance

The latest developments from this study reveal that most consumers have exited the payment assistance they received at the start of the pandemic.

Analysis and Data
Jul 14, 2021
CFPB Orders GreenSky To Refund $9M In Unauthorized Loans

The consent order requires GreenSky to refund or cancel up to $9 million in loans for the customers harmed by this illegal conduct.

Regulation and Compliance
Jul 13, 2021
CFPB Warns Landlords And Consumer Reporting Agencies To Report Accurate Rental Information

Inaccurate rental or eviction information can unfairly block families and individuals from safe, affordable housing.

Regulation and Compliance
Jul 01, 2021
FHFA Mandates Quarterly Fair Lending Reports

FHFA issued orders for all enterprises to submit quarterly Fair Lending Reports with data and information to improve the FHFA’s capabilities. 

Regulation and Compliance
Jul 01, 2021
FHFA Follows CFPB To Protect Borrowers Once COVID-19 Foreclosure And Eviction Moratoriums End

The Federal Housing Finance Agency made it clear that Fannie Mae and Freddie Mac servicers are not permitted to make first notice or filing for foreclosure that would be prohibited by the CFPB protections for borrowers affected by COVID-19.

Regulation and Compliance
Jun 30, 2021
CFPB Finds Evidence Of Redlining And Deceptive Acts In 2020

Enforcement actions resulted in more than $124 million in consumer remediation and civil money penalties in 2020

Regulation and Compliance
Jun 29, 2021