Regulations - Energy

The U.S. Department of Energy (DOE) is responsible for implementing federal policy on issues related to energy efficiency, conservation, and security. Following are links to recent agency regulatory activities that may impact cities and towns.

FHFA Notice of Proposed Rulemaking Concerning Enterprise Underwriting Standards for Property Assessed Clean Energy Programs (PACE)

On March 19, the U.S. Court of Appeals for the Ninth Circuit overturned a District Court ruling and dismissed a case against the Federal Housing Finance Agency (FHFA), which was undergoing a court-ordered rulemaking procedure on Enterprise Underwriting Standards for Property Assessed Clean Energy (PACE) programs.

The appeals court held that FHFA acted within its role as "conservator" of Fannie Mae and Freddie Mac (as opposed to a role of "regulator") when it issued a decision in 2011 to cease purchasing mortgages on PACE properties. The appeals court therefore concluded that it had no jurisdiction in the matter, as the Housing and Economic Recovery Act of 2008 that created FHFA stated that any action the Agency took in its role as a "conservator" could not be challenged in court. This argument was the basis of FHFA's motion to dismiss the lawsuit, however the lower court found that FHFA acted as a "regulator" in issuing its decision and needed to undergo a rulemaking process.

FHFA began that court-ordered rulemaking process in 2012 by issuing a Notice of Proposed Rulemaking on Enterprise Underwriting Standards for Property Assessed Clean Energy (PACE) programs. The proposed rule would instruct Fannie Mae and Freddie Mac (together, the Enterprises) to take any necessary actions to remove first-lien PACE obligations from their portfolio, instruct the Enterprises not to purchase any mortgage that is subject to a first-lien PACE obligation, and instruct the Enterprises not to consent to the imposition of a first-lien PACE obligation on any mortgage. The proposed rule also outlines three alternatives that FHFA is considering, including adoption of key underwriting standards.

Notwithstanding the court's ruling, it is possible, though unlikely, that FHFA could move forward with its rulemaking.
An FHFA official Statement issued on July 6, 2010 and a Directive issued on Feb. 28, 2011 objected to local governments holding the first lien on PACE homes to ensure repayment of public funds if the home goes into foreclosure, calling this a significant risk to the mortgage financier.

NLC continues to support local authority to implement residential PACE programs and contends that participation in the PACE program does not affect the safety and soundness of mortgages.

Commercial PACE programs are not affected by the U.S. Court of Appeals decision, and many communities across the country are implementing such programs.