California has created a $10 million mortgage loss reserve program to revive and expand its Property Assessed Clean Energy program, which makes residential energy and water efficiency projects more affordable.
PACE lets homeowners pay for energy efficiency improvements over time on their property tax bills. Local government agencies sell bonds to finance the efficiency improvements. Liens are placed on the participating homes, which are paid off by homeowners monthly on their property tax bills.
Residential PACE programs ran into a roadblock in 2010 when the Federal Housing Finance Agency determined that they put first mortgage lenders at risk, including those backed by the federal government, when a foreclosure or forced sale took place.
Approved March 11 by the California Office of Administrative Law, the loss reserve program seeks to ease these concerns by providing funds to reimburse the first mortgage lender for the PACE payments when the homeowner falls into default.
The California Alternative Energy and Advanced Transportation Financing Authority will administer the loss reserve program.