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 con-
travene 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. FLO-
RES, Mr. COLE, Mr. HANNA, Mr. DOLD, Mr. MANZULLO, Mrs. CAPPS, 
Ms. WOOLSEY, Mr. PERLMUTTER, Ms. MATSUI, and Mr. POLIS) intro-
duced the following bill; which was referred to the Committee on Finan-
cial 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 Representa-
tives 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’’. 
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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 govern-
ments to exercise their longstanding and traditional pow-
ers 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 coun-
ties, cities, boroughs, towns, parishes, villages, dis-
tricts, 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 prop-
erty 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 pro-
vide financing for PACE improvements. 
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(4) The term ‘‘PACE improvements’’ means 
qualified clean energy improvements, qualified en-
ergy conservation and efficiency improvements, and 
qualified water conservation and efficiency improve-
ments. 
(5) The term ‘‘PACE lien’’ means a lien secur-
ing 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 pro-
gram implemented by a local government under 
State law to provide financing for PACE improve-
ments 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 renew-
able energy sources, combined heat and power sys-
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tems, 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 war-
ranty or insurance policy for such improvements. 
(10) The term ‘‘energy conservation and effi-
ciency 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, re-
placement of windows, installation of energy controls 
or energy recovery systems, installation of building 
management systems, and installation of efficient 
lighting equipment, provided that such improve-
ments are permanently affixed to the property. Such 
term includes the reasonable costs of an audit un-
dertaken by a property owner to identify potential 
energy savings that could be achieved through instal-
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lation of any of the improvements described in this 
paragraph. 
(11) The term ‘‘water conservation and effi-
ciency 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 Fed-
eral Housing Finance Agency, acting in the Director’s 
general supervisory capacity, shall direct the Federal Na-
tional Mortgage Association and the Federal Home Loan 
Mortgage Corporation to— 
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(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 Na-
tional Mortgage Association or Federal Home Loan 
Mortgage Corporation and do not trigger the exer-
cise of remedies with respect to any provision of 
such uniform security instrument if the PACE as-
sessment 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 ef-
fect the purposes of this Act. 
(b) PROHIBITION OF DISCRIMINATION.—The Direc-
tor of the Federal Housing Finance Agency, the Comp-
troller of the Currency, the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corpora-
tion, the Federal Deposit Insurance Corporation, the Na-
tional Credit Union Administration, the Board of Gov-
ernors of the Federal Reserve System, and all Federal 
agencies and entities chartered or otherwise established 
under Federal law shall not discriminate in any manner 
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against States or local governments implementing or par-
ticipating 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 per-
mitted 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 cri-
teria 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 pro-
gram, are entitled to the protections of this Act only if 
the Program meets all of the requirements under this sec-
tion at the time of its establishment, or, in the case of 
any PACE program in effect upon the date of the enact-
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ment of this Act, not later than 60 days after such date 
of enactment. 
(b) CONSUMER PROTECTIONS APPLICABLE TO RESI-
DENTIAL 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 assess-
ment, either pursuant to a PACE agreement or 
by voting in the manner specified by State law. 
In the case of any property with multiple own-
ers, each owner or the owner’s authorized rep-
resentative 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 assess-
ment 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 assess-
ment. Upon full payment of the amount of the 
PACE assessment, including all outstanding in-
terest and charges and any penalties that may 
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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 partici-
pating property owner the costs and risks associated 
with participating in the PACE program, including 
risks related to their failure to pay PACE assess-
ments and the risk of enforcement of PACE liens. 
The local government shall disclose to the property 
owner the effective interest rate of the PACE assess-
ment, including all program fees. The local govern-
ment shall clearly and conspicuously provide the 
property owner the right to rescind his or her deci-
sion to enter into a PACE assessment, within 3 days 
of the original transaction. 
(3) NOTICE TO LIENHOLDERS.—Before enter-
ing 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 exist-
ing mortgages on the property written notice of the 
terms of the PACE assessment. 
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(4) CONFIDENTIALITY.—Any personal financial 
information provided by a property owner to a local 
government or an entity administering a PACE pro-
gram on behalf of a local government shall comply 
with applicable local, State, and Federal laws gov-
erning the privacy of the information. 
(c) REQUIREMENTS APPLICABLE ONLY TO NON-RES-
IDENTIAL PROPERTY.—A PACE program shall provide, 
with respect to non-residential property, for the following: 
(1) AUTHORIZATION
BY
LIENHOLDERS.—Be-
fore 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 commence-
ment of assessment shall enter into a written 
PACE agreement addressing the terms of the 
PACE improvement. In the case of any prop-
erty with multiple owners, the PACE agreement 
shall be signed by all owners or their legally au-
thorized representative or representatives. 
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(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 govern-
ment, the local government shall disburse funds 
to the property owner in payment for the 
PACE improvements or materials used in mak-
ing 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 out-
standing 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 as-
sessment has been paid in full and the local 
government shall also satisfy all requirements 
of State law to extinguish the PACE lien. 
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(3) DISCLOSURES BY LOCAL GOVERNMENT.— 
The local government shall disclose to the partici-
pating property owners the costs and risks associ-
ated 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 pro-
gram on behalf of a local government shall comply 
with applicable local, State, and Federal laws gov-
erning 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 pur-
chasers 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 OWN-
ERS.—Before levying a PACE assessment on a property, 
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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 as-
sessments 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 me-
chanics 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 prop-
erty owner’s period of ownership, whichever period is 
shorter. 
(4) The property owner has not filed for or de-
clared bankruptcy in the previous 7 years. 
(5) The property owner is current on all mort-
gage debt on the property. 
(6) The property owner or owners are the hold-
ers 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. 
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(8) The property meets any geographic eligi-
bility requirements established by the PACE pro-
gram. 
The local government may adopt additional criteria, ap-
propriate 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 improve-
ments, 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 Serv-
ices Network (RESNET); or who has obtained other 
similar independent certification shall have been 
commissioned by the local government or the prop-
erty owner and the audit or feasibility study shall— 
(A) identify recommended energy conserva-
tion, efficiency, and/or clean energy improve-
ments and such recommended improvements 
must include the improvements proposed to be 
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financed with the PACE assessment to the ex-
tent permitted by law; 
(B) estimate the potential cost savings, 
useful life, benefit-cost ratio, and simple pay-
back or return on investment for each improve-
ment; 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 im-
provements may be included in the total amount fi-
nanced. 
(2) AFFIXED
FOR
USEFUL
LIFE.—The local 
government shall have determined the improvements 
are intended to be affixed to the property for the en-
tire useful life of the improvements based on the ex-
pected useful lives of energy conservation, efficiency, 
and clean energy measures approved by the Depart-
ment of Energy. 
(3) QUALIFIED CONTRACTORS.—The improve-
ments must be made by a contractor or contractors, 
determined by the local government to be qualified 
to make the PACE improvements. A local govern-
ment may accept a designation of contractors as 
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qualified made by an electric or gas utility or an-
other appropriate entity. Any work requiring a li-
cense 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, sub-
mission 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 satisfac-
torily; and 
(C) documentation of all costs to be fi-
nanced and copies of any required permits. 
(g) FINANCING TERMS APPLICABLE ONLY TO RESI-
DENTIAL 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 
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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 sub-
section (f)(1), are expected to exceed the total cost 
to the property owner and the property owner’s suc-
cessors of the PACE assessment. In determining the 
amount that may be financed by a PACE assess-
ment, 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 improve-
ments. 
(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 
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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 consider-
ation 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 meas-
ures 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 in-
stallments that are due (including delinquent 
amounts), along with any applicable penalties and 
interest, except that before imposition of any pen-
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alties 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 assess-
ment; 
(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 pro-
gram shall not relieve a participating property owner 
from the obligation to pay that amount. 
Æ 
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