Washington Post:

Green initiative’s future murky as regulators weigh risks to homeowners
An Obama administration program to promote energy efficiency in homes appears to have met insurmountable resistance from financial regulators who are worried about its effect on residential mortgages, federal and local officials said Saturday.
As a result, the government has begun telling municipalities to think of other ways to use the millions in economic stimulus funds that had been set aside for the green initiative, officials said.
“Millions of dollars that would otherwise be invested and help out the local economy are on hold,” said Ben Pearlman, a county commissioner in Boulder, Colo.
The program is emblematic of President Obama’s effort to build the economy by reducing reliance on fossil fuels. It provides loans for such improvements as solar panels or new windows, and then allows homeowners to repay the money over many years through surcharges on property tax bills.
Under the program, known as “Property Assessed Clean Energy,” or PACE, the obligation to repay the loan stays with the home, transferring to a future owner if the home is sold. Because the PACE financing is a so-called “first lien” on the property, if the home lands in foreclosure, mortgage lenders take a backseat in pursuit of repayment.
In addition to providing business for home improvement contractors, the program could spur the emergence of a new financial market in bonds backed by PACE loans. That could create fresh opportunities for Wall Street.
Mortgage agencies Fannie Mae and Freddie Mac left the program’s future in doubt in May when they sent lenders an alert noting that they do not take on mortgages that are subordinate to other loans. Fannie and Freddie dominate the market for home loans.

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