Energy Efficiency Loans Lose the Backing of Fannie Mae and Freddie Mac

Homeowners looking for a hand with energy efficiency just got dealt a big blow – and the fallout could affect everyone looking to take out a mortgage.

As the Wall Street Journal reports, the federal regulator that oversees Fannie Mae and Freddie Mac announced this week that it will not permit homeowners with mortgages owned by those agencies to participate in property-assessed clean energy (PACE) programs.

PACE, which has been approved by legislatures in 23 states, lets homeowners finance weatherization projects by getting loans from their local government. Those loans then get paid back over time via property tax bills, much like a sewer assessment. In order to raise money for the loans, local governments sell bonds to investors.

That's not acceptable to the feds, who object to having other creditors in front of Fannie Mae and Freddie Mac's investors, when it's time to get paid back.