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Letter to Mr. Alfred Pollard, General Counsel, Federal Housing Finance Agency


Location: Unknown

Colorado U.S. Senator Michael Bennet today urged officials at the Federal Housing Finance Agency (FHFA) to reconsider proposed regulations that could block programs to help homeowners finance energy efficiency upgrades from moving forward.

Bennet authored a letter along with Senators Mark Udall (D-CO), Al Franken (D-MN), Jeff Merkley (D-OR) and Mark Begich (D-AK) asking the agency to consider changes to the proposed rule that would allow Property Assessed Clean Energy (PACE) programs to proceed.

In the letter to FHFA General Counsel Alfred Pollard, the senators wrote, "We have concerns with FHFA's assertions that PACE programs materially increase financial risks to Fannie Mae and Freddie Mac. We also have concerns with the proposed rule overall as it appears to continue to block PACE programs from moving forward."

The letter recommends the adoption a proposed alternative to the new rule that would allow PACE programs to move forward while protecting government-sponsored enterprises like Fannie Mae and Freddie Mac with rigorous underwriting criteria.

"As evidenced by the early success of the ClimateSmart Loan Program in Boulder County, PACE programs have tremendous potential to increase business revenue and further a community's shared climate action goals to reduce energy use, save money, improve air quality and decrease greenhouse gas emissions," Boulder County Commissioner Will Toor said. "We are extremely disappointed by the lack of flexibility and vision we've encountered with the FHFA and support the senators' efforts to implement sensible underwriting guidelines that will help restore PACE programs across the country."

The PACE financing concept was established by local communities to help homeowners finance energy efficiency and renewable energy upgrades by allowing property owners to borrow funds from participating local and state governments. Those funds are then repaid over a multi-year period through an assessment attached to their property tax payments.

In Colorado, PACE financing has helped hundreds of Colorado homeowners install renewable energy systems and improve energy efficiency; and could potentially help hundreds more across the state. However, recent actions taken by Fannie Mae and Freddie Mac, which currently back the vast majority of mortgages, have created uncertainty that has led many counties and municipalities to suspend PACE financing to homeowners.

Bennet has been a leader in the push to keep PACE Programs going during his time in the Senate.

The full text of the letter is below:
September 13, 2012
Mr. Alfred Pollard, General Counsel
Attn: Comments/RIN 2590-AA53
Federal Housing Finance Agency, Eighth Floor
400 Seventh Street, SW.
Washington, DC 20024

Dear Mr. Pollard:

We write to express our comments with regards to the FHFA's proposed rule for Property Assessed Clean Energy (PACE) programs. Specifically we have concerns with FHFA's assertions that PACE programs materially increase financial risks to Fannie Mae and Freddie Mac (the Enterprises). We also have concerns with the proposed rule overall as it appears to continue to block PACE programs from moving forward. As set out below, we propose an alternative that would improve the proposed rule and allow PACE to proceed.

More than 30,000 comment letters supporting PACE were submitted by state and local governments, federal and state elected officials, banks, real estate developers, energy companies, and organizations representing millions of Americans in response to FHFA's Advance Notice of Proposed Rulemaking (ANPR). Those comments cited numerous studies, articles and legal decisions providing evidence that PACE increases the value of homes, reduces homeowners' energy costs, grows jobs and economic activity, and helps local governments meet greenhouse gas reduction and clean energy goals. FHFA needs to consider the weight of the evidence in the record establishing that PACE does not pose material risks to the Enterprises.

In addition to prohibiting the Enterprises from buying mortgages on properties with PACE liens, the proposed rule allows the Enterprises to make mortgages on such properties immediately due, and would prohibit the Enterprises from consenting to PACE obligations under any conditions. FHFA's Proposed Rule challenges the well-established authority of local governments to finance improvements with a valid public purpose through assessments, and unfortunately imperils an effective means of creating jobs, ensuring energy security and protecting public health and the environment.

Instead of a rule obstructing PACE, FHFA should adopt a modified version of its Alternative 3 to the proposed rule. Alternative 3 provides for rigorous underwriting criteria to reduce the risk of default, thereby protecting the Enterprises. Alternative 3 should be improved to ensure that the Enterprises will indeed support PACE programs if local governments comply with these rigorous underwriting standards.

FHFA's adoption of the suggestions outlined above will allow PACE programs to move forward while enhancing the value of the Enterprises' portfolio and respecting the rights of local governments. We welcome the opportunity to work with FHFA to further refine the Proposed Rule if necessary.
Thank you for your consideration.

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