When Charlie Yarbrough, a Santa Rosa, Calif., software engineer, decided to put solar panels on the roof of his newly purchased home, he took advantage of a novel funding program known as PACE, short for property assessed clean energy. Working with local installers, he was able to borrow the $25,000 cost at the equivalent of 7.25 percent annually from the Sonoma County Energy Independence Program, a pool of public money, to be paid back over 20 years with his property taxes.
Yarbrough estimates the solar panels have cut annual power costs for his three-bedroom, 1,800-square-foot home by $1,000, while boosting by $40,000 the value of the home he bought for $300,000 in 2009. As energy costs rise in coming years, he expects his savings will grow. “Back of the envelope, this is like a 4 percent loan for an improvement which is the right thing to do,” he says, factoring in the energy savings and property appreciation.
Now, it looks like Yarborough and thousands like him got in just under the wire. PACE all but ground to a halt last July in the wake of the housing bust and mortgage crisis. The Federal Housing Financing Agency (FHFA) — which oversees Fannie Mae and Freddie Mac — characterized PACE as a threat to existing mortgages. It was a signal to banks that the housing finance giants, which together buy and resell the majority of U.S. mortgages, would refuse to buy any mortgages with PACE financing attached. Simultaneously, the Office of the Comptroller of Currency issued similar guidance, further chilling lending activity…