PACE and BeyondCisco DeVries | September 24, 2010

We are going to make it a lot easier to borrow money. We are doing this by encouraging communities to give you the option to pay the expense of retrofitting your home by paying it back on your property taxes.

National PACE Policy 4 States Have PACE Legislation Pending24 States Have PACE Authority

FHFA/Fannie Mae PACE ActivitiesJune 2009: FHFA guidance letterConcerns regarding senior lien and homeowner riskSeptember 2009: Fannie Mae lender letterReviewing underwriting guidelines for PACE; Until guidelines are issued, treat payments as a special assessmentMay 2010: Fannie Mae lender letterPACE loans and promise to issue additional guidance and work with federal and state agencies, while preserving the status of mortgage loans originated as first liens

FHFA/Fannie Mae PACE ActivitiesJuly 2010: FHFA guidance letterSafety and soundness concernsViolation of Uniform Security InstrumentReduce loan amount by potential PACE amountAugust 2010: Fannie Mae lender letterPACE loans prior to July 6th must be paid off at time of refinanceFannie Mae will not purchase mortgage loans [with PACE debt] unless the terms of the PACE program do not permit priority over first mortgage liens.

Path ForwardNegotiationLitigationLegislation

NegotiationsOctober 2009: White House led interagency working groupResult: White House Policy Framework for PACERelease of DOE/ARRA Funds for PACE programsSpring 2010: Renewed discussions regarding PACE guidelines and pilotsResult: May 5th Fannie Mae/Freddie Mac letters and July 6th FHFA/FDIC/OCC lettersJuly 2010: Congressionally led PACE discussions with FHFA and other regulatorsResult: FHFA sent a letter to Members of Congress breaking off talks.

LitigationCalifornia Files SuitPeople of the State of California vs. Federal Housing Finance Agency (Filed July 14, 2010)California seeks a prompt judicial declaration against Fannie Mae and Freddie Mac that, under California law: (a) PACE programs operate by assessments, not loans, and such assessments are valid; (b) liens that may result from PACE assessments, like those resulting from other types of assessments, have priority over mortgages; and (c) participation in PACE programs is compatible with, and not in violation of, Fannie Maes and Freddie Macs standardized mortgage documents.Additional lawsuits announced by Babylon, Sonoma County, Leon County, and Sierra Club

LegislationPACE Assessment Protection Act HOUSE: HR 5766 (Thompson); 48 co-sponsorsSENATE: S 3642 (Boxer); 5 co-sponsorsTo ensure that the underwriting standards of Fannie Mae and Freddie Mac facilitate the use of property assessed clean energy programs to finance the installation of renewable energy and energy efficiency improvements.Legislation would require Fannie Mae and Freddie Mac to issue PACE underwriting standards that are consistent with US DOE guidelines

Legislative StrategyFour key stepsMake a priority for Congress overallOversight committee supportSenate Banking Committee (Sen. Dodd) House Financial Services Committee (Rep. Frank)Republican co-sponsors in House and SenateAttach to appropriate vehicleHow to helpSample resolutions and other materials at: www.pacenow.org State/Local Governments Adam Byrnes, adam@renewfund.com, 510-350-3733ICLEI has great resources and been a leader in PACE efforts: www.icleiusa.org

A Few Lessons From PACECapital markets and regulators dont know how to value energy retrofits and energy savingsFinancing has become a dirty word with property ownersThe value of a PACE program went way beyond financingEliminating upfront cost was partly psychologicalProvides guidance on contractors, quality assurance, and roadmapKeep it simple!Complexity is a killerDont call it an audit!

What Now?Subordinate Lien PACE?PACE CommercialAlternative Financing Options for ResidentialCompetitive Marketplace for Financing

PACE OptionsSubordinate Lien PACEMaine moving forwardAttract capital?Technical issues with tax collectionsMove Forward with PACE CommercialPotential regulatory issues -- OCCStrong support from commercial real estate firms, ESCOs, and contractorsDOE playbook for PACE Commercial in October

Alternatives to PACEDevelop alternative financing options for residentialUnsecured financing (personal credit based)Secured financing (such as a home equity loan or HUD Title 1)On-bill financing (utility bills)New structures Competitive marketplace for financingMultiple cities/states pursuing

Energy Upgrade California

One Stop Shop for all Clean Energy ServicesOn-line Property Analysis ToolContractor MarketplaceRebates and IncentivesFinancing Marketplace

EnergyUpgradeCalifornia.org

Cisco DeVries | cisco@renewfund.com | (510) 451-7900

*****Additional LawsuitsBabylon, NY: July 13, 2010Sonoma County, CA: July 27, 2010Sierra Club: July 30, 3010

Current status of lawsuits?

Not sure. I seem to recall a Dec date for the first hearing. But it is a distant recollection. You should check with the AGs office.

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