I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘PACE Assessment 

5 Protection Act of 2011’’. 


tjames on DSKG8SOYB1PROD with BILLS
2 

•HR 2599 IH

1 SEC. 2. PURPOSE. 

2 It is the purpose of this Act to ensure that those 

3 PACE programs which incorporate prudent programmatic 

4 safeguards to protect the interest of mortgage holders and 

5 property owners remain viable as a potential avenue for 

6 States and local governments to achieve the many public 

7 benefits associated with energy efficiency, water efficiency, 

8 and renewable energy retrofits. In addition, it is essential 

9 that the power and authority of State and local govern10 ments to exercise their longstanding and traditional pow11 ers to levy taxes for public purposes not be impeded. 

12 SEC. 3. DEFINITIONS. 

13 For purposes of this Act the following definitions 

14 apply: 

15 (1) The term ‘‘local government’’ includes coun16 ties, cities, boroughs, towns, parishes, villages, dis17 tricts, and other political subdivisions authorized 

18 under State laws to establish PACE programs. 

19 (2) The term ‘‘PACE agreement’’ means an 

20 agreement between a local government and a prop21 erty owner detailing the terms of financing for a 

22 PACE improvement. 

23 (3) The term ‘‘PACE assessment’’ means a tax 

24 or assessment levied by a local government to pro25 vide financing for PACE improvements. 


tjames on DSKG8SOYB1PROD with BILLS
3 

•HR 2599 IH

1 (4) The term ‘‘PACE improvements’’ means 

2 qualified clean energy improvements, qualified en3 ergy conservation and efficiency improvements, and 

4 qualified water conservation and efficiency improve5 ments. 

6 (5) The term ‘‘PACE lien’’ means a lien secur7 ing a PACE assessment, which may be senior to the 

8 lien of pre-existing purchase money mortgages on 

9 the same property subject to the PACE lien. 

10 (6) The term ‘‘PACE program’’ means a pro11 gram implemented by a local government under 

12 State law to provide financing for PACE improve13 ments by levying PACE assessments. 

14 (7) The term ‘‘residential property’’ means a 

15 property with up to 4 private residences. 

16 (8) The term ‘‘non-residential property’’ means 

17 private property that is— 

18 (A) not used for residential purposes; or 

19 (B) residential property with 5 or more 

20 residences. 

21 (9) The term ‘‘clean energy improvements’’ 

22 means any system on privately owned property for 

23 producing electricity for, or meeting heating, cooling, 

24 or water heating needs of the property, using renew25 able energy sources, combined heat and power sysVerDate Mar 15 2010 04:46 Jul 21, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2599.IH H2599

tjames on DSKG8SOYB1PROD with BILLS
4 

•HR 2599 IH

1 tems, or energy systems using wood biomass (but 

2 not construction and demolition waste) or natural 

3 gas. Such improvements include solar photovoltaic, 

4 solar thermal, wood biomass, wind, and geothermal 

5 systems. Such term includes the reasonable costs of 

6 a study undertaken by a property owner to analyze 

7 the feasibility of installing any of the improvements 

8 described in this paragraph and the cost of a war9 ranty or insurance policy for such improvements. 

10 (10) The term ‘‘energy conservation and effi11 ciency improvements’’ means measures to reduce 

12 consumption, through conservation or more efficient 

13 use, of electricity, fuel oil, natural gas, propane, or 

14 other forms of energy by the property, including air 

15 sealing, installation of insulation, installation of 

16 heating, cooling, or ventilation systems, building 

17 modification to increase the use of daylighting, re18 placement of windows, installation of energy controls 

19 or energy recovery systems, installation of building 

20 management systems, and installation of efficient 

21 lighting equipment, provided that such improve22 ments are permanently affixed to the property. Such 

23 term includes the reasonable costs of an audit un24 dertaken by a property owner to identify potential 

25 energy savings that could be achieved through instalVerDate Mar 15 2010 04:46 Jul 21, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2599.IH H2599

tjames on DSKG8SOYB1PROD with BILLS
5 

•HR 2599 IH

1 lation of any of the improvements described in this 

2 paragraph. 

3 (11) The term ‘‘water conservation and effi4 ciency improvements’’ means measures to reduce 

5 consumption, through conservation or more efficient 

6 use of water by the property, including installation 

7 of low-flow toilets and showerheads, installation of 

8 timer or timing system for hot water heaters, and 

9 installation of rain catchment systems. 

10 (12) The term ‘‘property owner’’ means the 

11 owner of record of real property that is subject to 

12 a PACE assessment, whether such property is zoned 

13 or used for residential, commercial, industrial, or 

14 other uses. 

15 (13) The term ‘‘qualified’’ means, with respect 

16 to PACE improvements, that the improvements meet 

17 the criteria specified in section 5. 

18 SEC. 4. TREATMENT OF PACE PROGRAMS BY FNMA AND 

19 FHLMC. 

20 (a) LENDER GUIDANCE.—The Director of the Fed21 eral Housing Finance Agency, acting in the Director’s 

22 general supervisory capacity, shall direct the Federal Na23 tional Mortgage Association and the Federal Home Loan 

24 Mortgage Corporation to— 


tjames on DSKG8SOYB1PROD with BILLS
6 

•HR 2599 IH

1 (1) issue guidance, within 30 days after the 

2 date of enactment of this Act, providing that the 

3 levy of a PACE assessment and the creation of a 

4 PACE lien do not constitute a default on any loan 

5 secured by a uniform instrument of Federal Na6 tional Mortgage Association or Federal Home Loan 

7 Mortgage Corporation and do not trigger the exer8 cise of remedies with respect to any provision of 

9 such uniform security instrument if the PACE as10 sessment and the PACE lien meet the requirements 

11 of section 5; 

12 (2) rescind any prior issued guidance or Selling 

13 and Servicing Guides that are inconsistent with the 

14 provisions of paragraph (1); and 

15 (3) take all such other actions necessary to ef16 fect the purposes of this Act. 

17 (b) PROHIBITION OF DISCRIMINATION.—The Direc18 tor of the Federal Housing Finance Agency, the Comp19 troller of the Currency, the Federal National Mortgage 

20 Association, the Federal Home Loan Mortgage Corpora21 tion, the Federal Deposit Insurance Corporation, the Na22 tional Credit Union Administration, the Board of Gov23 ernors of the Federal Reserve System, and all Federal 

24 agencies and entities chartered or otherwise established 

25 under Federal law shall not discriminate in any manner 


tjames on DSKG8SOYB1PROD with BILLS
7 

•HR 2599 IH

1 against States or local governments implementing or par2 ticipating in a PACE program, or against any property 

3 that is obligated to pay a PACE assessment or is subject 

4 to a PACE lien, including, without limitation, by— 

5 (1) prohibiting lending within such jurisdiction 

6 or requiring more restrictive underwriting criteria 

7 for properties within such jurisdiction; 

8 (2) except for the escrowing of funds as per9 mitted by section (5)(g)(2), requiring payment of 

10 PACE assessment amounts that are not due or that 

11 are not delinquent; or 

12 (3) applying more restrictive underwriting cri13 teria to any property that is obligated to pay a 

14 PACE assessment and is subject to a PACE lien 

15 than any such entity would apply to such property 

16 in the event that such property were subject to a 

17 State or municipal tax or assessment that was not 

18 a PACE assessment. 

19 SEC. 5. PACE PROGRAMS ELIGIBLE FOR PROTECTION. 

20 (a) IN GENERAL.—A PACE program, and any 

21 PACE assessment and PACE lien related to such pro22 gram, are entitled to the protections of this Act only if 

23 the Program meets all of the requirements under this sec24 tion at the time of its establishment, or, in the case of 

25 any PACE program in effect upon the date of the enactVerDate Mar 15 2010 03:00 Jul 21, 2011 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2599.IH H2599

tjames on DSKG8SOYB1PROD with BILLS
8 

•HR 2599 IH

1 ment of this Act, not later than 60 days after such date 

2 of enactment. 

3 (b) CONSUMER PROTECTIONS APPLICABLE TO RESI4 DENTIAL PROPERTY.—A PACE program shall provide, 

5 with respect to residential property, for the following: 

6 (1) PROPERTY OWNER AGREEMENTS.— 

7 (A) PACE ASSESSMENT.—The property 

8 owner shall agree in writing to a PACE assess9 ment, either pursuant to a PACE agreement or 

10 by voting in the manner specified by State law. 

11 In the case of any property with multiple own12 ers, each owner or the owner’s authorized rep13 resentative shall execute a PACE agreement or 

14 vote in the manner specified by State law, as 

15 applicable. 

16 (B) PAYMENT SCHEDULE.—The property 

17 owner shall agree to a payment schedule that 

18 identifies the term over which PACE assess19 ment installments will be due, the frequency 

20 with which PACE assessment installments will 

21 be billed and amount of each installment, and 

22 the annual amount due on the PACE assess23 ment. Upon full payment of the amount of the 

24 PACE assessment, including all outstanding in25 terest and charges and any penalties that may 


tjames on DSKG8SOYB1PROD with BILLS
9 

•HR 2599 IH

1 become due, the local government shall provide 

2 the participating property owner with a written 

3 statement certifying that the PACE assessment 

4 has been paid in full and the local government 

5 shall also satisfy all requirements of State law 

6 to extinguish the PACE lien. 

7 (2) DISCLOSURES BY LOCAL GOVERNMENT.— 

8 The local government shall disclose to the partici9 pating property owner the costs and risks associated 

10 with participating in the PACE program, including 

11 risks related to their failure to pay PACE assess12 ments and the risk of enforcement of PACE liens. 

13 The local government shall disclose to the property 

14 owner the effective interest rate of the PACE assess15 ment, including all program fees. The local govern16 ment shall clearly and conspicuously provide the 

17 property owner the right to rescind his or her deci18 sion to enter into a PACE assessment, within 3 days 

19 of the original transaction. 

20 (3) NOTICE TO LIENHOLDERS.—Before enter21 ing into a PACE agreement or voting in favor of a 

22 PACE assessment, the property owner or the local 

23 government shall provide to the holders of any exist24 ing mortgages on the property written notice of the 

25 terms of the PACE assessment. 


tjames on DSKG8SOYB1PROD with BILLS
10 

•HR 2599 IH

1 (4) CONFIDENTIALITY.—Any personal financial 

2 information provided by a property owner to a local 

3 government or an entity administering a PACE pro4 gram on behalf of a local government shall comply 

5 with applicable local, State, and Federal laws gov6 erning the privacy of the information. 

7 (c) REQUIREMENTS APPLICABLE ONLY TO NON-RES8 IDENTIAL PROPERTY.—A PACE program shall provide, 

9 with respect to non-residential property, for the following: 

10 (1) AUTHORIZATION BY LIENHOLDERS.—Be11 fore entering into a PACE agreement with a local 

12 government or voting in favor of PACE assessments 

13 in the manner specified by State law, the property 

14 owner shall obtain written authorization from the 

15 holders of the first mortgage on the property. 

16 (2) PACE AGREEMENT.— 

17 (A) TERMS.—The local government and 

18 the owner of the property to which the PACE 

19 assessment applies at the time of commence20 ment of assessment shall enter into a written 

21 PACE agreement addressing the terms of the 

22 PACE improvement. In the case of any prop23 erty with multiple owners, the PACE agreement 

24 shall be signed by all owners or their legally au25 thorized representative or representatives. 


tjames on DSKG8SOYB1PROD with BILLS
11 

•HR 2599 IH

1 (B) PACE IMPROVEMENTS.—The property 

2 owner shall contract for PACE improvements, 

3 purchase materials to be used in making such 

4 improvements, or both, and upon submission of 

5 documentation required by the local govern6 ment, the local government shall disburse funds 

7 to the property owner in payment for the 

8 PACE improvements or materials used in mak9 ing such improvements. 

10 (C) PAYMENT SCHEDULE.—The PACE 

11 agreement shall include a payment schedule 

12 showing the term over which payments will be 

13 due on the assessment, the frequency with 

14 which payments will be billed and amount of 

15 each payment, and the annual amount due on 

16 the assessment. Upon full payment of the 

17 amount of the assessment, including all out18 standing interest and charges and any penalties 

19 that may become due, the local government 

20 shall provide the participating property owner 

21 with a written statement certifying that the as22 sessment has been paid in full and the local 

23 government shall also satisfy all requirements 

24 of State law to extinguish the PACE lien. 


tjames on DSKG8SOYB1PROD with BILLS
12 

•HR 2599 IH

1 (3) DISCLOSURES BY LOCAL GOVERNMENT.— 

2 The local government shall disclose to the partici3 pating property owners the costs and risks associ4 ated with participating in the program, including 

5 risks related to their failure to make payments and 

6 the risk of enforcement of PACE liens. 

7 (4) CONFIDENTIALITY.—Any personal financial 

8 information provided by a property owner to a local 

9 government or an entity administering a PACE pro10 gram on behalf of a local government shall comply 

11 with applicable local, State, and Federal laws gov12 erning the privacy of the information. 

13 (d) PUBLIC NOTICE OF PACE ASSESSMENT.—The 

14 local government shall file a public notice of the PACE 

15 assessment in a manner sufficient to provide notice of the 

16 PACE assessment to potential lenders and potential pur17 chasers of the property. The notice shall consist of the 

18 following statement or its substantial equivalent: ‘‘This 

19 property is subject to a tax or assessment that is levied 

20 to finance the installation of qualifying energy and water 

21 conservation and efficiency improvements or clean energy 

22 improvements. The tax or assessment is secured by a lien 

23 that is senior to all private liens.’’. 

24 (e) ELIGIBILITY OF RESIDENTIAL PROPERTY OWN25 ERS.—Before levying a PACE assessment on a property, 


tjames on DSKG8SOYB1PROD with BILLS
13 

•HR 2599 IH

1 the local government shall ensure that all of the following 

2 are true with respect to the property: 

3 (1) All property taxes and any other public as4 sessments are current and have been current for 3 

5 years or the property owner’s period of ownership, 

6 whichever period is shorter. 

7 (2) There are no involuntary liens, such as me8 chanics liens, on the property in excess of $1,000. 

9 (3) No notices of default and not more than one 

10 instance of property-based debt delinquency have 

11 been recorded during the past 3 years or the prop12 erty owner’s period of ownership, whichever period is 

13 shorter. 

14 (4) The property owner has not filed for or de15 clared bankruptcy in the previous 7 years. 

16 (5) The property owner is current on all mort17 gage debt on the property. 

18 (6) The property owner or owners are the hold19 ers of record of the property. 

20 (7) The property title is not subject to power of 

21 attorney, easements, or subordination agreements 

22 restricting the authority of the property owner to 

23 subject the property to a PACE lien. 


tjames on DSKG8SOYB1PROD with BILLS
14 

•HR 2599 IH

1 (8) The property meets any geographic eligi2 bility requirements established by the PACE pro3 gram. 

4 The local government may adopt additional criteria, ap5 propriate to PACE programs, for determining whether to 

6 provide PACE financing to a property. 

7 (f) QUALIFYING IMPROVEMENTS AND QUALIFYING

8 CONTRACTORS FOR RESIDENTIAL PROPERTIES.—PACE 

9 improvements for residential properties shall be qualified 

10 if they meet the following criteria: 

11 (1) AUDIT.—For clean energy improvements 

12 and energy conservation and efficiency improve13 ments, an audit or feasibility study performed by a 

14 person who has been certified as a building analyst 

15 by the Building Performance Institute or as a Home 

16 Energy Rating System (HERS) Rater by a Rating 

17 Provider accredited by the Residential Energy Serv18 ices Network (RESNET); or who has obtained other 

19 similar independent certification shall have been 

20 commissioned by the local government or the prop21 erty owner and the audit or feasibility study shall— 

22 (A) identify recommended energy conserva23 tion, efficiency, and/or clean energy improve24 ments and such recommended improvements 

25 must include the improvements proposed to be 


tjames on DSKG8SOYB1PROD with BILLS
15 

•HR 2599 IH

1 financed with the PACE assessment to the ex2 tent permitted by law; 

3 (B) estimate the potential cost savings, 

4 useful life, benefit-cost ratio, and simple pay5 back or return on investment for each improve6 ment; and 

7 (C) provide the estimated overall difference 

8 in annual energy costs with and without the 

9 recommended improvements. 

10 State law may provide that the cost of the audit and 

11 the cost of a warranty covering the financed im12 provements may be included in the total amount fi13 nanced. 

14 (2) AFFIXED FOR USEFUL LIFE.—The local 

15 government shall have determined the improvements 

16 are intended to be affixed to the property for the en17 tire useful life of the improvements based on the ex18 pected useful lives of energy conservation, efficiency, 

19 and clean energy measures approved by the Depart20 ment of Energy. 

21 (3) QUALIFIED CONTRACTORS.—The improve22 ments must be made by a contractor or contractors, 

23 determined by the local government to be qualified 

24 to make the PACE improvements. A local govern25 ment may accept a designation of contractors as 


tjames on DSKG8SOYB1PROD with BILLS
16 

•HR 2599 IH

1 qualified made by an electric or gas utility or an2 other appropriate entity. Any work requiring a li3 cense under applicable law shall be performed by an 

4 individual holding such license. A local government 

5 may elect to provide financing for improvements 

6 made by the owner of the property, but shall not 

7 permit the value of the owner’s labor to be included 

8 in the amount financed. 

9 (4) DISBURSEMENT OF PAYMENTS.—A local 

10 government must require, prior to disbursement of 

11 final payments for the financed improvements, sub12 mission by the property owner in a form acceptable 

13 to the local government of— 

14 (A) a document signed by the property15 owner requesting disbursement of funds; 

16 (B) a certificate of completion, certifying 

17 that improvements have been installed satisfac18 torily; and 

19 (C) documentation of all costs to be fi20 nanced and copies of any required permits. 

21 (g) FINANCING TERMS APPLICABLE ONLY TO RESI22 DENTIAL PROPERTY.—A PACE program shall provide, 

23 with respect to residential property, for the following: 

24 (1) AMOUNT FINANCED.—PACE improvements 

25 shall be financed on terms such that the total energy 


tjames on DSKG8SOYB1PROD with BILLS
17 

•HR 2599 IH

1 and water cost savings realized by the property 

2 owner and the property owner’s successors during 

3 the useful lives of the improvements, as determined 

4 by the audit or feasibility study pursuant to sub5 section (f)(1), are expected to exceed the total cost 

6 to the property owner and the property owner’s suc7 cessors of the PACE assessment. In determining the 

8 amount that may be financed by a PACE assess9 ment, the total amount of all rebates, grants, and 

10 other direct financial assistance received by the 

11 owner on account of the PACE improvements shall 

12 be deducted from the cost of the PACE improve13 ments. 

14 (2) PACE ASSESSMENTS.—The total amount of 

15 PACE assessments for a property shall not exceed 

16 10 percent of the estimated value of the property. A 

17 property owner who escrows property taxes with the 

18 holder of a mortgage on a property subject to PACE 

19 assessment may be required by the holder to escrow 

20 amounts due on the PACE assessment, and the 

21 mortgage holder shall remit such amounts to the 

22 local government in the manner that property taxes 

23 are escrowed and remitted. 

24 (3) OWNER EQUITY.—As of the effective date of 

25 the PACE agreement or the vote required by State 


tjames on DSKG8SOYB1PROD with BILLS
18 

•HR 2599 IH

1 law, the property owner shall have equity in the 

2 property of not less than 15 percent of the estimated 

3 value of the property calculated without consider4 ation of the amount of the PACE assessment or the 

5 value of the PACE improvements. 

6 (4) TERM OF FINANCING.—The maximum term 

7 of financing provided for a PACE improvement may 

8 be 20 years. The term shall in no case exceed the 

9 weighted average expected useful life of the PACE 

10 improvement or improvements. Expected useful lives 

11 used for all calculations under this paragraph shall 

12 be consistent with the expected useful lives of energy 

13 conservation and efficiency and clean energy meas14 ures approved by the Department of Energy. 

15 (h) COLLECTION AND ENFORCEMENT.—A PACE 

16 program shall provide that— 

17 (1) PACE assessments shall be collected in the 

18 manner specified by State law; 

19 (2) notwithstanding any other provision of law, 

20 in the event of a transfer of property ownership 

21 through foreclosure, the transferring property owner 

22 may be obligated to pay only PACE assessment in23 stallments that are due (including delinquent 

24 amounts), along with any applicable penalties and 

25 interest, except that before imposition of any penVerDate Mar 15 2010 03:00 Jul 21, 2011 Jkt 099200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H2599.IH H2599

tjames on DSKG8SOYB1PROD with BILLS
19 

•HR 2599 IH

1 alties or fees, the PACE program shall provide an 

2 opportunity to any holder of a senior lien on the 

3 property to assume payment of the PACE assess4 ment; 

5 (3) PACE assessment installments that are not 

6 due may not be accelerated by foreclosure except as 

7 provided by State law; and 

8 (4) payment of a PACE assessment installment 

9 from the loss reserve established for a PACE pro10 gram shall not relieve a participating property owner 

11 from the obligation to pay that amount. 

Æ 


tjames on DSKG8SOYB1PROD with BILLS