Local government programs to lend homeowners money for energy-efficient improvements like solar panels, new windows and insulation are sucking up some of Fannie Mae's energy.
About 10 states have enacted laws allowing for such programs, and the government-sponsored enterprise is concerned because when homeowners fall behind on the loans, the debt can take priority over the mortgage lien.
Last week, Fannie said it is working on underwriting requirements for homes whose owners have taken out energy loans. In the meantime, underwriters should treat the debts the same as special assessments that cities and homeowners associations impose on homeowners to pay for things like road and sewer improvements. (Among other things, Fannie's lender guide says the maximum mortgage amount on a home must be reduced by the amount of unpaid special assessments at closing.)
The GSE told servicers last week that they should be prepared to advance the overdue amounts on energy loans to the municipalities, just as they normally do for unpaid property taxes. Servicers that maintain escrow accounts for borrowers' property taxes and insurance premiums should do the same for energy loan payments, Fannie said.
In a June letter to the national trade groups for governors and state legislators, James Lockhart, then the director of the Federal Housing Finance Agency, Fannie's conservator, warned that the energy loan programs could create new risks of foreclosure by increasing homeowners' debt burdens.