California Sues Fannie Mae and Freddie Mac Over Solar Mortgages

Fannie Mae and Freddie Mac have put a halt to a program where homeowners could finance solar purchases through mortgages. California is suing to stop the move. 

I’m sure you have heard of the old say the left hand doesn’t know what the right hand is doing. Well, this is the case with the federal government. President Obama has touted the move to renewable, clean energy as a major part of his political platform. To this end, he put in significant funding for renewable energy into the Stimulus plan.

Not all the agencies in the federal government apparently go the message. The Federal Housing Finance Agency oversees Fannie Mae and Freddie Mac. These two quasi-government agencies backed over 95 percent of all residential mortgages written in 2009. Together, they have slammed the brakes on a government program that not only receives funding from President Obama’s green initiatives, but also is a backbone of the solar industry. 

The issue involves the Property Assessed Clean Energy program. It is one of those all to few brilliant government programs that is a win-win on all fronts. The program works by letting local municipalities issue bonds to raise money. The money is then loaned to homeowners who use it to buy and install solar panel systems on their home. The loan is tied to the home, not the owner. Payments are then made over five to ten years to payback the amount borrowed. As you might imagine, the program has been a huge hit. 

So, why are the three federal agencies slamming the brakes on the program? They feel it creates a difficult “evaluation” of mortgage applications. The problem is the solar assessment loans are senior to the basic mortgage, which means they get priority if a foreclosure happens. It is rather ironic that Fannie Mae, Freddie Mac and the Federal Housing Finance Agency did nothing during the subprime mortgage disaster that nearly took down the banking industry, but are now taking action against a paltry solar energy initiative. 

Will California prevail in getting the plan reinstituted? The courts will probably rule against the state, but this is a political move. It is undertaken in an effort to make President Obama crackdown on the three government agencies. In an election year, that’s a good strategy.