[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>