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A ‘hiccup’ for Pitkin County energy loans

Janet Urquhart
The Aspen Times
Vail, CO Colorado

ASPEN – Mortgage underwriter the Federal National Mortgage Association – or Fannie Mae – has tossed a wrench into plans for an Energy Smart Loan Program in Pitkin County and other communities around the country, but it’s expected to pose only a temporary setback.

A May 5 “lender letter” issued by Fannie May, addressing energy loans attached to property mortgages, caused a stir with this declaration: “The terms of the Fannie Mae/Freddie Mac Uniform Security Instruments prohibit loans that have senior lien status to a mortgage.”

“This is definitely a hiccup,” said Dylan Hoffman, Pitkin County energy program manager.



The letter suggests the nation’s biggest underwriters of mortgage loans won’t accept notes that have energy project financing attached to them, which would make selling or refinancing a home with an Energy Smart loan attached much more difficult.

“It would have a tremendous impact if there was a sale or refinancing,” Hoffman said.



The stance would “effectively eliminate” Property Assessed Clean Energy (PACE) programs like Pitkin County’s start-up Energy Smart program, according to PACE Now, a national advocacy group for such efforts. PACE is an umbrella term for initiatives such as the local Energy Smart Loan Program.

“If Fanny Mae continued to take this view, it would effectively shut down PACE programs,” Hoffman said. “We don’t see that happening.”

Both the state and federal governments have endorsed Energy Smart-style programs, he noted.



In a letter to Vice President Joseph Biden, PACE Now urges the administration to rescind the Fannie Mae/Freddie Mac stance in order to protect homeowners in communities that have PACE programs in place.

Nineteen states and the District of Columbia have adopted PACE-enabling legislation after the White House endorsed energy projects financed via tax assessments, the PACE Now letter notes. By law, such assessments have senior lien status to mortgages.

The Energy Smart “loans” aren’t loans in the traditional sense. They should be treated like any other special assessment attached to a property, advocates argue.

Pitkin County has not yet begun accepting Energy Smart applications – it plans to launch the application process in June – and Hoffman expects the Fannie Mae objection to be resolved long before the first liens would be placed on local properties at the end of the year, to be paid with property tax bills that arrive in early 2011.

“There’s a lot of time for the program to move forward,” he said.

Last fall, voters in Pitkin, Eagle and Gunnison counties all approved the formation of an Energy Smart Loan Program. The programs will function similarly, though each county sets up their funding mechanism individually.

In Pitkin County, Alpine Bank has offered to provide a $1 million loan to get the program up and running. The county will provide start-up loan money this year, then wrap the loans into a single sum to borrow from the bank in November. Property owners who voluntarily take out loans to finance renewable energy or energy-efficiency projects for their homes will repay the loan through a special assessment on their property tax bill. The repayment period is 15 years.

The debt stays with the property, if it changes hands. Unlike other special assessments on a property, though, the cost of the assessment for the energy project could be offset through energy savings, Hoffman said.


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