The Property Assessed Clean Energy Program (PACE) is being blocked for the time being by, of all things, Freddie Mac and Fannie Mae, holders of about half of the home mortgages in the country and a major player in the financial crisis that we are still recovering from.

Berkeley pioneered a way to finance energy efficiency and renewable energy installations on buildings in 2008. Since then, 22 states have introduced similar programs. But the Property Assessed Clean Energy Program (PACE) is being blocked for the time being by, of all things, Freddie Mac and Fannie Mae, holders of about half of the home mortgages in the country and a major player in the financial crisis that we are still recovering from. PACE adds jobs and helps revitalize the construction industry; the irony is gushing like an oil spill.

PACE allows a city to offer loans to homeowners to improve the energy efficiency of their homes and to add renewable energy such as photovoltaics (PV). The loan is paid back to the city over 20 years or so through increased property taxes. But the savings in energy costs each year outpaces the increase in property taxes. It’s a win for the homeowner and the environment. When the home is sold, the loan stays with the house, since the new homeowners will continue to enjoy the benefit of the energy retrofits.

But Fannie and Freddie sent a letter to lenders questioning the practice. They worry that a city will get its loan money back first if the homeowner defaults, and leave the lender on the hook for the costs. When the owner of half the mortgages question a practice, lenders put the breaks on.

There is a lot at stake. Recurve, a San Francisco-based home performance company, stands to lose hundreds of thousands of dollars in home retrofit work that may no longer be financed through PACE. And California and other states stand to lose millions of seed money that would be provided by the federal government to cities to support PACE programs.

“PACE was working for us,” says Golden. Recurve booked 12 clients for retrofit work when the potential clients learned about PACE financing. “We are still working with those clients trying to find other lenders, and by offering to buy down interest rates from the lenders. But and our schedule has turned to Swiss cheese and we’ve had to put a hold on hiring.”

Neal DeSnoo, Energy Program Officer for the City of Berkeley calls the Fannie and Freddie letter “vague and irresponsible.” “There are plenty of good PACE models out there they could look at and provide guidance. Instead, they sent a letter out with no guidance.” He sees some solutions to the problem. “The FHFA [Federal Housing Finance Authority] can issue practical guidelines concerning the issuing of loans to homeowners, or they could look at each program individually.” One way to protect the lender is to look at the loan to value ratio to help ensure the homeowner has the wherewithal to pay off the loan. Fannie Mae and Freddy Mac should understand how to lend responsibly, shouldn’t they?

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Blower door equipment is used to measure a home's
air leaks. A blower door test is part of the evaluation for
determining a home's HERS Index.
Photo by: D&R International

Remember the day when most men knew the horsepower of their muscle cars? Now most of us are concerned about miles per gallon. But what can we use to bring prestige to our houses? It used to be that a large square footage gave us bragging rights. But if all goes according to the plan of the Residential Energy Services Network (RESNET), the talk around the water cooler will be "What's your house's HERS score?"

Home energy ratings have been around since 1981. The idea began in the mortgage industry to credit the energy efficiency of homes towards the home mortgage. An energy efficient home means that the homeowner is spending less each month on electricity and natural gas and therefore has more to spend on the mortgage. RESNET has been developing the Home Energy Rating System (HERS) since 1981. In the beginning, it was the higher the HERS score the better. But because of the more widespread introduction of renewable energy systems, such as photovoltaics (PV) and solar hot water systems, into homes, and the ability of many houses today to produce as much electricity and/or hot water as they need over the course of a year-these are called net zero-energy houses-a HERS Index of "0" is the goal. A HERS score of 85 means that a new home meets Energy Star standards. A HERS score of 150 means you're living with an Energy Hog. The typical existing home in the United States has a HERS Index of 130.

HERS raters look at a home's heating and cooling efficiency, insulation levels, appliance and lighting energy use, window efficiency, a home's solar orientation, and other factors that are tailored to the home's climate region, and use computer software to calculate a HERS index.

Some readers my be asking, "Why should I care?" You should care because the HERS score is becoming the standard du jour for homebuilders. If you want a bigger, energy efficiency mortgage, you'll need a HERS rater to measure the efficiency of the home you want to buy and to tell you what retrofits you need to do to qualify. If you are a builder and want to catch the "green wave" by earning an Energy Star rating for the new homes you are selling, you've got to get those homes rated by a certified HERS rater.

Many states have Energy Efficiency Portfolio Standards and Energy Efficiency Credit trading, and many more will in the future as we move towards national standards for meeting greenhouse gas emissions goals. The HERS Index is in place to serve the need for a third-party verifier of energy efficiency improvements.

Want energy efficiency tax credits for your new home? Better find a RESNET-certified rater. Moving to Canada? The Canadian RESNET, or CRESNET, is in the process of accepting the U.S. standards. I don't know the HERS Index of my home, but we did recently have some air sealing and insulation work done-but not quite to Energy Star standards. My guess is we'd score about 100. What's your HERS score?

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