PACE Assessment Protection Act of 2011 - Requires the Director of the Federal Housing Agency (FHA) to direct the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to issue guidance providing that the levy of a PACE (property assessed clean energy) assessment and the creation of a PACE lien do not constitute a default on any loan secured by one of its uniform instruments, and do not trigger the exercise of remedies with respect to any provision of the instrument, if the PACE assessment and the PACE lien meet specified requirements.
Lists as PACE improvements any qualified clean energy improvements, energy conservation and efficiency improvements, and water conservation and efficiency improvements.
Prohibits the FHA Director, the Comptroller of the Currency, Fannie Mae, Freddie Mac, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Board of Governors of the Federal Reserve System, and all federal agencies and entities chartered or otherwise established under federal law from discriminating in any manner against state or local governments implementing or participating in a PACE program, or against any property that is obligated to pay a PACE assessment or is subject to a PACE lien.
Specifies requirements a PACE program, and any related PACE assessment and PACE lien, must meet to be entitled to the protections of this Act.
Details obligations of property owners with respect to PACE assessments, and requires the local government to disclose to the participating property owner the costs and risk associated with participating in the PACE program.
Prescribes requirements for: (1) non-residential properties; and (2) qualifying PACE improvements, qualifying contractors, and financing terms for residential properties.
Limits the total amount of PACE assessments for a property to 10% of its estimated value. Requires the property owner to have equity in the property of at least 15%.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2599 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 2599
To prevent Fannie Mae, Freddie Mac, and other Federal residential and
commercial mortgage lending regulators from adopting policies that
contravene established State and local property assessed clean energy
laws.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 20, 2011
Ms. Hayworth (for herself, Mr. Thompson of California, Mr. Daniel E.
Lungren of California, Mr. Sensenbrenner, Mr. Sessions, Mr. Flores, Mr.
Cole, Mr. Hanna, Mr. Dold, Mr. Manzullo, Mrs. Capps, Ms. Woolsey, Mr.
Perlmutter, Ms. Matsui, and Mr. Polis) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To prevent Fannie Mae, Freddie Mac, and other Federal residential and
commercial mortgage lending regulators from adopting policies that
contravene established State and local property assessed clean energy
laws.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``PACE Assessment Protection Act of
2011''.
SEC. 2. PURPOSE.
It is the purpose of this Act to ensure that those PACE programs
which incorporate prudent programmatic safeguards to protect the
interest of mortgage holders and property owners remain viable as a
potential avenue for States and local governments to achieve the many
public benefits associated with energy efficiency, water efficiency,
and renewable energy retrofits. In addition, it is essential that the
power and authority of State and local governments to exercise their
longstanding and traditional powers to levy taxes for public purposes
not be impeded.
SEC. 3. DEFINITIONS.
For purposes of this Act the following definitions apply:
(1) The term ``local government'' includes counties,
cities, boroughs, towns, parishes, villages, districts, and
other political subdivisions authorized under State laws to
establish PACE programs.
(2) The term ``PACE agreement'' means an agreement between
a local government and a property owner detailing the terms of
financing for a PACE improvement.
(3) The term ``PACE assessment'' means a tax or assessment
levied by a local government to provide financing for PACE
improvements.
(4) The term ``PACE improvements'' means qualified clean
energy improvements, qualified energy conservation and
efficiency improvements, and qualified water conservation and
efficiency improvements.
(5) The term ``PACE lien'' means a lien securing a PACE
assessment, which may be senior to the lien of pre-existing
purchase money mortgages on the same property subject to the
PACE lien.
(6) The term ``PACE program'' means a program implemented
by a local government under State law to provide financing for
PACE improvements by levying PACE assessments.
(7) The term ``residential property'' means a property with
up to 4 private residences.
(8) The term ``non-residential property'' means private
property that is--
(A) not used for residential purposes; or
(B) residential property with 5 or more residences.
(9) The term ``clean energy improvements'' means any system
on privately owned property for producing electricity for, or
meeting heating, cooling, or water heating needs of the
property, using renewable energy sources, combined heat and
power systems, or energy systems using wood biomass (but not
construction and demolition waste) or natural gas. Such
improvements include solar photovoltaic, solar thermal, wood
biomass, wind, and geothermal systems. Such term includes the
reasonable costs of a study undertaken by a property owner to
analyze the feasibility of installing any of the improvements
described in this paragraph and the cost of a warranty or
insurance policy for such improvements.
(10) The term ``energy conservation and efficiency
improvements'' means measures to reduce consumption, through
conservation or more efficient use, of electricity, fuel oil,
natural gas, propane, or other forms of energy by the property,
including air sealing, installation of insulation, installation
of heating, cooling, or ventilation systems, building
modification to increase the use of daylighting, replacement of
windows, installation of energy controls or energy recovery
systems, installation of building management systems, and
installation of efficient lighting equipment, provided that
such improvements are permanently affixed to the property. Such
term includes the reasonable costs of an audit undertaken by a
property owner to identify potential energy savings that could
be achieved through installation of any of the improvements
described in this paragraph.
(11) The term ``water conservation and efficiency
improvements'' means measures to reduce consumption, through
conservation or more efficient use of water by the property,
including installation of low-flow toilets and showerheads,
installation of timer or timing system for hot water heaters,
and installation of rain catchment systems.
(12) The term ``property owner'' means the owner of record
of real property that is subject to a PACE assessment, whether
such property is zoned or used for residential, commercial,
industrial, or other uses.
(13) The term ``qualified'' means, with respect to PACE
improvements, that the improvements meet the criteria specified
in section 5.
SEC. 4. TREATMENT OF PACE PROGRAMS BY FNMA AND FHLMC.
(a) Lender Guidance.--The Director of the Federal Housing Finance
Agency, acting in the Director's general supervisory capacity, shall
direct the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation to--
(1) issue guidance, within 30 days after the date of
enactment of this Act, providing that the levy of a PACE
assessment and the creation of a PACE lien do not constitute a
default on any loan secured by a uniform instrument of Federal
National Mortgage Association or Federal Home Loan Mortgage
Corporation and do not trigger the exercise of remedies with
respect to any provision of such uniform security instrument if
the PACE assessment and the PACE lien meet the requirements of
section 5;
(2) rescind any prior issued guidance or Selling and
Servicing Guides that are inconsistent with the provisions of
paragraph (1); and
(3) take all such other actions necessary to effect the
purposes of this Act.
(b) Prohibition of Discrimination.--The Director of the Federal
Housing Finance Agency, the Comptroller of the Currency, the Federal
National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, the Board of Governors of the Federal
Reserve System, and all Federal agencies and entities chartered or
otherwise established under Federal law shall not discriminate in any
manner against States or local governments implementing or
participating in a PACE program, or against any property that is
obligated to pay a PACE assessment or is subject to a PACE lien,
including, without limitation, by--
(1) prohibiting lending within such jurisdiction or
requiring more restrictive underwriting criteria for properties
within such jurisdiction;
(2) except for the escrowing of funds as permitted by
section (5)(g)(2), requiring payment of PACE assessment amounts
that are not due or that are not delinquent; or
(3) applying more restrictive underwriting criteria to any
property that is obligated to pay a PACE assessment and is
subject to a PACE lien than any such entity would apply to such
property in the event that such property were subject to a
State or municipal tax or assessment that was not a PACE
assessment.
SEC. 5. PACE PROGRAMS ELIGIBLE FOR PROTECTION.
(a) In General.--A PACE program, and any PACE assessment and PACE
lien related to such program, are entitled to the protections of this
Act only if the Program meets all of the requirements under this
section at the time of its establishment, or, in the case of any PACE
program in effect upon the date of the enactment of this Act, not later
than 60 days after such date of enactment.
(b) Consumer Protections Applicable to Residential Property.--A
PACE program shall provide, with respect to residential property, for
the following:
(1) Property owner agreements.--
(A) PACE assessment.--The property owner shall
agree in writing to a PACE assessment, either pursuant
to a PACE agreement or by voting in the manner
specified by State law. In the case of any property
with multiple owners, each owner or the owner's
authorized representative shall execute a PACE
agreement or vote in the manner specified by State law,
as applicable.
(B) Payment schedule.--The property owner shall
agree to a payment schedule that identifies the term
over which PACE assessment installments will be due,
the frequency with which PACE assessment installments
will be billed and amount of each installment, and the
annual amount due on the PACE assessment. Upon full
payment of the amount of the PACE assessment, including
all outstanding interest and charges and any penalties
that may become due, the local government shall provide
the participating property owner with a written
statement certifying that the PACE assessment has been
paid in full and the local government shall also
satisfy all requirements of State law to extinguish the
PACE lien.
(2) Disclosures by local government.--The local government
shall disclose to the participating property owner the costs
and risks associated with participating in the PACE program,
including risks related to their failure to pay PACE
assessments and the risk of enforcement of PACE liens. The
local government shall disclose to the property owner the
effective interest rate of the PACE assessment, including all
program fees. The local government shall clearly and
conspicuously provide the property owner the right to rescind
his or her decision to enter into a PACE assessment, within 3
days of the original transaction.
(3) Notice to lienholders.--Before entering into a PACE
agreement or voting in favor of a PACE assessment, the property
owner or the local government shall provide to the holders of
any existing mortgages on the property written notice of the
terms of the PACE assessment.
(4) Confidentiality.--Any personal financial information
provided by a property owner to a local government or an entity
administering a PACE program on behalf of a local government
shall comply with applicable local, State, and Federal laws
governing the privacy of the information.
(c) Requirements Applicable Only to Non-Residential Property.--A
PACE program shall provide, with respect to non-residential property,
for the following:
(1) Authorization by lienholders.--Before entering into a
PACE agreement with a local government or voting in favor of
PACE assessments in the manner specified by State law, the
property owner shall obtain written authorization from the
holders of the first mortgage on the property.
(2) PACE agreement.--
(A) Terms.--The local government and the owner of
the property to which the PACE assessment applies at
the time of commencement of assessment shall enter into
a written PACE agreement addressing the terms of the
PACE improvement. In the case of any property with
multiple owners, the PACE agreement shall be signed by
all owners or their legally authorized representative
or representatives.
(B) PACE improvements.--The property owner shall
contract for PACE improvements, purchase materials to
be used in making such improvements, or both, and upon
submission of documentation required by the local
government, the local government shall disburse funds
to the property owner in payment for the PACE
improvements or materials used in making such
improvements.
(C) Payment schedule.--The PACE agreement shall
include a payment schedule showing the term over which
payments will be due on the assessment, the frequency
with which payments will be billed and amount of each
payment, and the annual amount due on the assessment.
Upon full payment of the amount of the assessment,
including all outstanding interest and charges and any
penalties that may become due, the local government
shall provide the participating property owner with a
written statement certifying that the assessment has
been paid in full and the local government shall also
satisfy all requirements of State law to extinguish the
PACE lien.
(3) Disclosures by local government.--The local government
shall disclose to the participating property owners the costs
and risks associated with participating in the program,
including risks related to their failure to make payments and
the risk of enforcement of PACE liens.
(4) Confidentiality.--Any personal financial information
provided by a property owner to a local government or an entity
administering a PACE program on behalf of a local government
shall comply with applicable local, State, and Federal laws
governing the privacy of the information.
(d) Public Notice of PACE Assessment.--The local government shall
file a public notice of the PACE assessment in a manner sufficient to
provide notice of the PACE assessment to potential lenders and
potential purchasers of the property. The notice shall consist of the
following statement or its substantial equivalent: ``This property is
subject to a tax or assessment that is levied to finance the
installation of qualifying energy and water conservation and efficiency
improvements or clean energy improvements. The tax or assessment is
secured by a lien that is senior to all private liens.''.
(e) Eligibility of Residential Property Owners.--Before levying a
PACE assessment on a property, the local government shall ensure that
all of the following are true with respect to the property:
(1) All property taxes and any other public assessments are
current and have been current for 3 years or the property
owner's period of ownership, whichever period is shorter.
(2) There are no involuntary liens, such as mechanics
liens, on the property in excess of $1,000.
(3) No notices of default and not more than one instance of
property-based debt delinquency have been recorded during the
past 3 years or the property owner's period of ownership,
whichever period is shorter.
(4) The property owner has not filed for or declared
bankruptcy in the previous 7 years.
(5) The property owner is current on all mortgage debt on
the property.
(6) The property owner or owners are the holders of record
of the property.
(7) The property title is not subject to power of attorney,
easements, or subordination agreements restricting the
authority of the property owner to subject the property to a
PACE lien.
(8) The property meets any geographic eligibility
requirements established by the PACE program.
The local government may adopt additional criteria, appropriate to PACE
programs, for determining whether to provide PACE financing to a
property.
(f) Qualifying Improvements and Qualifying Contractors for
Residential Properties.--PACE improvements for residential properties
shall be qualified if they meet the following criteria:
(1) Audit.--For clean energy improvements and energy
conservation and efficiency improvements, an audit or
feasibility study performed by a person who has been certified
as a building analyst by the Building Performance Institute or
as a Home Energy Rating System (HERS) Rater by a Rating
Provider accredited by the Residential Energy Services Network
(RESNET); or who has obtained other similar independent
certification shall have been commissioned by the local
government or the property owner and the audit or feasibility
study shall--
(A) identify recommended energy conservation,
efficiency, and/or clean energy improvements and such
recommended improvements must include the improvements
proposed to be financed with the PACE assessment to the
extent permitted by law;
(B) estimate the potential cost savings, useful
life, benefit-cost ratio, and simple payback or return
on investment for each improvement; and
(C) provide the estimated overall difference in
annual energy costs with and without the recommended
improvements.
State law may provide that the cost of the audit and the cost
of a warranty covering the financed improvements may be
included in the total amount financed.
(2) Affixed for useful life.--The local government shall
have determined the improvements are intended to be affixed to
the property for the entire useful life of the improvements
based on the expected useful lives of energy conservation,
efficiency, and clean energy measures approved by the
Department of Energy.
(3) Qualified contractors.--The improvements must be made
by a contractor or contractors, determined by the local
government to be qualified to make the PACE improvements. A
local government may accept a designation of contractors as
qualified made by an electric or gas utility or another
appropriate entity. Any work requiring a license under
applicable law shall be performed by an individual holding such
license. A local government may elect to provide financing for
improvements made by the owner of the property, but shall not
permit the value of the owner's labor to be included in the
amount financed.
(4) Disbursement of payments.--A local government must
require, prior to disbursement of final payments for the
financed improvements, submission by the property owner in a
form acceptable to the local government of--
(A) a document signed by the property-owner
requesting disbursement of funds;
(B) a certificate of completion, certifying that
improvements have been installed satisfactorily; and
(C) documentation of all costs to be financed and
copies of any required permits.
(g) Financing Terms Applicable Only to Residential Property.--A
PACE program shall provide, with respect to residential property, for
the following:
(1) Amount financed.--PACE improvements shall be financed
on terms such that the total energy and water cost savings
realized by the property owner and the property owner's
successors during the useful lives of the improvements, as
determined by the audit or feasibility study pursuant to
subsection (f)(1), are expected to exceed the total cost to the
property owner and the property owner's successors of the PACE
assessment. In determining the amount that may be financed by a
PACE assessment, the total amount of all rebates, grants, and
other direct financial assistance received by the owner on
account of the PACE improvements shall be deducted from the
cost of the PACE improvements.
(2) PACE assessments.--The total amount of PACE assessments
for a property shall not exceed 10 percent of the estimated
value of the property. A property owner who escrows property
taxes with the holder of a mortgage on a property subject to
PACE assessment may be required by the holder to escrow amounts
due on the PACE assessment, and the mortgage holder shall remit
such amounts to the local government in the manner that
property taxes are escrowed and remitted.
(3) Owner equity.--As of the effective date of the PACE
agreement or the vote required by State law, the property owner
shall have equity in the property of not less than 15 percent
of the estimated value of the property calculated without
consideration of the amount of the PACE assessment or the value
of the PACE improvements.
(4) Term of financing.--The maximum term of financing
provided for a PACE improvement may be 20 years. The term shall
in no case exceed the weighted average expected useful life of
the PACE improvement or improvements. Expected useful lives
used for all calculations under this paragraph shall be
consistent with the expected useful lives of energy
conservation and efficiency and clean energy measures approved
by the Department of Energy.
(h) Collection and Enforcement.--A PACE program shall provide
that--
(1) PACE assessments shall be collected in the manner
specified by State law;
(2) notwithstanding any other provision of law, in the
event of a transfer of property ownership through foreclosure,
the transferring property owner may be obligated to pay only
PACE assessment installments that are due (including delinquent
amounts), along with any applicable penalties and interest,
except that before imposition of any penalties or fees, the
PACE program shall provide an opportunity to any holder of a
senior lien on the property to assume payment of the PACE
assessment;
(3) PACE assessment installments that are not due may not
be accelerated by foreclosure except as provided by State law;
and
(4) payment of a PACE assessment installment from the loss
reserve established for a PACE program shall not relieve a
participating property owner from the obligation to pay that
amount.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Capital Markets and Government Sponsored Enterprises.
Referred to the Subcommittee on Insurance, Housing and Community Opportunity.
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