Green Mortgage Initiative – PACE

In an effort to accelerate the economy – the Obama administration sees “retro-fitting” houses with more Energy Efficient items as an answer.  If we all put in efficient toilets, and windows, and solar water heaters (for instance) it will create more jobs, improve the value of the homes, and cut down on Energy use.  No brainer?

Well, what sounds good in theory gets all gunked up when you try to put it into action – at least that’s what the Wall Street Journal reports:

The initiative, called Property Assessed Clean Energy, or PACE, aims to eliminate the high upfront costs that have kept homeowners from making cost-saving energy retrofits on their homes. Under the program, property owners borrow money from their local government to pay for the retrofits, repaying cities over 15 to 20 years through a special assessment that is added to their property-tax bills. Local governments fund the programs by selling municipal bonds to investors.

But the programs are raising the blood pressure of mortgage investors, including Fannie Mae, Freddie Mac, and their regulator, because PACE liens become senior to existing mortgage debt. That allows PACE lenders to be paid before mortgage lenders if the homeowner defaults and goes into foreclosure.