A NY Times article dated June 30, 2010, details a major problem with the PACE (Property Assessed Clean Energy) program recently launched from D.C.
This program helps homeowners install solar panels and other energy improvements on their homes, and pay for it over time on their property tax bills.
The issue here is the priority of the liens. Fannie Mae and Freddie Mac, the government entities that guarantee more than half of the residential mortgages in the United States, have been denying loans. They are worried that taxpayers will end up as losers if a homeowner defaults on a mortgage on a home that uses such creative financing.
Typically, property taxes must be paid first from any proceeds on a foreclosed home. Fannie Mae and Freddie Mac have stated that energy-efficiency liens could not take priority over a mortgage.
Under the financing programs, a local government borrows money through bonds or other means, and then uses it to make loans to homeowners to cover the upfront costs of solar installations or other energy improvements.
Each owner repays the loan over 20 years through a special property tax assessment, which stays with the home even if it is sold.