The quasi-public Connecticut Green Bank is taking another stab at creating an energy-efficiency lending program for homeowners, something that exists in just a handful of states.
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The quasi-public Connecticut Green Bank is taking another stab at creating an energy-efficiency lending program for homeowners, something that exists in just a handful of states.
A proposed bill currently before legislature's Energy & Technology Committee would create a residential version of the state's Commercial Property Assessed Clean Energy program, or C-PACE.
It's the Green Bank's flagship program and has grown to one of the largest in the country. Since its creation in 2012, C-PACE has funneled $95 million in public-private financing to more than 150 commercial, industrial and multi-family landlords in the state.
The funds can be used to install efficient lighting, HVAC systems, windows and a variety of other equipment. Building owners repay the loan through a special assessment on their property tax bills over 20 years or less.
That assessment mechanism is part of the challenge in implementing a residential version of the program (R-PACE), which state policymakers have been eying for years.
Mortgage lenders are wary of R-PACE because the assessments — which are similar to property tax liens used by local governments — could effectively cut them in the creditor line in the event of a foreclosure. They also worry that assessments will make it more difficult to sell residential mortgages to the secondary market.
Meantime, Realtors worry that the residential clean energy program could harm the housing market and make it more difficult to sell foreclosed properties — an already complicated process.
However, Green Bank CEO Bryan Garcia and General Counsel Brian Farnen told legislators last week that, in a foreclosure situation, the bill would only give priority to the portion of a PACE assessment in arrears.
“I assume it's not worth it for them to foreclose on such a small piece that's in arrears,” Farnen said.
He added that no residential program in any state has foreclosed on a single borrower.
The Federal Housing and Finance Administration threw a wrench in the R-PACE hopes of many states in 2010 when it directed Fannie Mae and Freddie Mac — major acquirers of U.S. mortgages — not to purchase home loans with PACE liens attached.
More recently, there have been several positive developments for PACE advocates. The Federal Housing Administration last year said it would insure mortgages that have PACE liens as long as certain criteria are met. The Department of Energy also issued guidance in November instructing how PACE programs should be designed. Farnen said the proposed bill follows that guidance, which includes provisions meant to protect consumers.
In some states, homeowners have reportedly signed up for PACE financing, sometimes with a door-to-door salesman, without fully understanding the terms or how much their property tax bill would increase.
Protections built into the Connecticut bill include caps on the amount of the assessment compared to the fair-market value of the property and contractor licensing requirements.
– Matt Pilon
