The Federal Housing Finance Agency just released its long-awaited notice of proposed rulemaking on PACE (property assessed clean energy) financing by Fannie Mae and Freddie Mac, and the FHFA is decidedly negative in its outlook, Leanne Tobias reported on the Greezbiz blog.

The goal of the PACE program is to improve energy efficiency -- thereby lowering energy bills and emissions.In PACE programs, local governments front the cost of energy efficiency improvements like solar panel installation and then levy special taxes on homeowners who choose to participate. The governments secure their investment by placing a lien against participating properties, and it's those liens the FHFA objects to. The agency says because those liens are first in line, ahead of mortgages on the property, they raise safety and soundness concerns for mortgage lender.

The June 2012 notice says FHFA favors a continued ban on Freddie's and Fannie's participation in PACE programs. However, the notice presents for public comment by July 30 three risk mitigation alternatives that might induce FHFA to permit Fannie and Freddie to buy PACE-encumbered debt.

To submit a public comment on the FHFA's proposal, send an email by July 30 to RegComments@fhfa.gov, with ‘‘RIN 2590–AA53’’ in the subject line of the message.

For some excellent background on this issue, check out the PACE NOW coalition's action page.