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15/ 1 RESOLUTION NO. ______ _ 2 3 A Resolution removing the City of South Miami's support of the 4 residential component of the PACE program. 5 6 WHEREAS, the City of South Miami adopted Resolution No. 24-10-13058, dated 7 January 26, 2010, supporting the Green Corridor District legislation, which is a PACE 8 program; and 9 10 WHEREAS, the City of South Miami adopted Resolution No. 145-11-13459, 11 dated September 6, 2011, in which the City Commission entered into an agreement with 12 other municipalities in order to provide for the upfront financing for qualifying 13 improvements as provided for in Section 163.08, Florida Statutes; and 14 15 WHEREAS, the City adopted Resolution No. 149-12-13706 authorizing the City 16 Manager to execute the amended and restated Inter-local Agreement between the City 17 of South Miami, the Town of Cutler Bay, Village of Palmetto Bay, Village of Pinecrest, 18 Miami Shores Village, the City of Coral Gables and the City of Miami, relating to the 19 Green Corridor Property Assessment Clean Energy (PACE) District; and 20 21 WHEREAS, placing a PACE residential loan on a residential property may place 22 residential property owners in default on their existing FNMA, FHLMC or FHA financing; 23 and 24 25 WHEREAS, PACE residential financing places residential property owners at a 26 disadvantage regarding acquiring readily available home financing from established real 27 estate financing markets; and 28 29 WHEREAS, placing a PACE residential loan on a residential property may limit 30 the ability to sell residential property only to buyers not seeking FNMA, FHLMC or FHA 31 loans; and 32 33 WHEREAS, the financing made available to residential homeowners by PACE 34 may not represent the lowest cost financing option to our City's residential homeowners; 35 and 36 37 WHEREAS, Green Energy Corridor misrepresents the City's control of funds, 38 and relationships with home contractors and subcontractors, giving the impression that 39 the City has vetted and approves of them; and 40 41 WHEREAS, the Green Corridor advertising gives the appearance that the City of 42 South Miami endorses the contractors and subcontractors recommended by them; and 43 44 WHEREAS, the City of Miami and The City of Coral Gables do not presently offer 45 PACE financing to their residential homes; and 46 Page 1 of2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 WHEREAS, the City Commission finds that this resolution is in the best interest and welfare of the residents of the City; and WHEREAS, the City as a member of the District has complete control over the administration and implementation of their own PACE program which includes the ability to review and improve program documents, marketing strategies, and determining eligible property types and improvements. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF SOUTH MIAMI, FLORIDA THAT: Section 1. All involvement relating to the Green Corridor Property Assessment Clean Energy (PACE) District Inter-local Agreement shall exclude residential properties in the city of South Miami. Section 2. A letter shall be sent by the City Manager to all owners of residential properties in the City of South Miami retracting its endorsement and advising that, for their benefit, the City is no longer participating in the Green Corridor as it pertains to residential properties. Section 3. The City Attorney shall advise the members of the governing board, per the Inter-local agreement, informing them of this action. Section 4. Severability. If any section clause, sentence, or phrase of this resolution is for any reason held invalid or unconstitutional by a court of competent jurisdiction, the holding shall not affect the validity of the remaining portions of this resolution. Section 5. Effective Date. This resolution shall become effective immediately upon adoption by vote of the City Commission. PASSED AND ADOPTED this __ day of _____ , 2013. ATTEST: CITY CLERK READ AND APPROVED AS TO FORM, LANGUAGE, LEGALITY AND EXECUTION THEREOF CITY ATTORNEY Page 2 of2 APPROVED: MAYOR COMMISSION VOTE: Mayor Stoddard: Vice Mayor Liebman: Commissioner Newman: Commissioner Harris: Commissioner Welsh: FEDERAL HOUSING FINANCE AGENCY For Immediate Release July 6,2010 STATEMENT Contact: Corinne Russell Stefanie Mullin FHFA Statement on Certain Energy Retrofit Loan Programs (202) 414-6921 (202) 414-6376 After careful review and over a year of working with federal and state government agencies, the Federal Housing Finance Agency (FHF A) has determined that certain energy retrofit lending programs present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Specifically, programs denominated as Property Assessed Clean Energy (PACE) seek to foster lending for retrofits of residential or commercial properties through a county or city's tax assessment regime. Under most of these programs, such loans acquire a priority lien over existing mortgages, though certain states have chosen not to adopt such priority positions for their loans. First liens established by PACE loans are unlike routine tax assessments and pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors. The size and duration of PACE loans exceed typical local tax programs and do not have the traditional community benefits associated with taxing initiatives. FHF A urged state and local governments to reconsider these programs and continues to call for a pause in such programs so concerns can be addressed. First liens for such loans represent a key alteration of traditional mortgage lending practice. They present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation. While the first lien position offered in most PACE programs minimizes credit risk for investors funding the programs, it alters traditional lending priorities. Underwriting for PACE programs results in collateral-based lending rather than lending based upon ability-to-pay, the absence of Truth-in-Lending Act and other consumer protections, and uncertainty as to whether the home improvements actually produce meaningful reductions in energy consumption. Efforts are just underway to develop underwriting and consumer protection standards as well as energy retrofit standards that are critical for homeowners and lenders to understand the risks and rewards of any energy retrofit lending program. However, first liens that disrupt a fragile housing finance market and long-standing lending priorities, the absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders determine the value of retrofit products combine to raise safety and soundness concerns. On May 5,2010, Fannie Mae and Freddie Mac alerted their seller-servicers to gain an understanding of whether there are existing or prospective PACE or PACE-like programs in jurisdictions where they do business, to be aware that programs with first liens run contrary to the Fannie Mae-Freddie Mac Uniform Security Instrument and that the Enterprises would provide additional guidance should the programs move beyond the experimental stage. Those lender letters remain in effect. Today, FHF A is directing Fannie Mae, Freddie Mac and the Federal Home Loan Banks to undertake the following prudential actions: 1. For any homeowner who obtained a PACE or PACE-like loan with a priority first lien prior to this date, FHF A is directing Fannie Mae and Freddie Mac to waive their Uniform Security Instrument prohibitions against such senior liens. 2. In addressing PACE programs with first liens, Fannie Mae and Freddie Mac should undertake actions that protect their safe and sound operations. These include, but are not limited to: -Adjusting loan-to-value ratios to reflect the maximum permissible PACE loan amount available to borrowers in PACE jurisdictions; -Ensuring that loan covenants require approvalj consent for any PACE loan; -Tightening borrower debt-to-income ratios to account for additional obligations associated with possible future PACE loans; -Ensuring that mortgages on properties in a jurisdiction offering PACE-like programs satisfy all applicable federal and state lending regulations and guidance. Fannie Mae and Freddie Mac should issue additional guidance as needed. 3. The Federal Home Loan Banks are directed to review their collateral policies in order to assure that pledged collateral is not adversely affected by energy retrofit programs that include first liens. Nothing in this Statement affects the normal underwriting programs of the regulated entities or their dealings with PACE programs that do not have a senior lien priority. Further, nothing in these directions to the regulated entities affects in any way underwriting related to traditional tax programs, but is focused solely on senior lien PACE lending initiatives. FHFA recognizes that PACE and PACE-like programs pose additional lending challenges, but also represent serious efforts to reduce energy consumption. FHF A remains committed to working with federal, state, and local government agencies to develop and implement energy retrofit lending programs with appropriate underwriting guidelines and consumer protection standards. FHF A will also continue to encourage the establishment of energy efficiency standards to support such programs. ### The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.9 trillion in funding for the u.s. mortgage markets andjinancial institutions. Breaking News: PACE Dies in the Ninth Circuit The West Coast PACE litigation party appears to have ended. After favorable rulings from the California Northern District Court for PACE backers, the Ninth Circuit today dismissed the case outright. As background, Property Assessed Clean Energy (PACE) programs allow municipal governments to finance residential and commercial energy improvements, with property owners repaying the governments via property tax assessments. The program was just taking off in states across the country when in 2010 the Federal Housing Finance Agency (FHFA) decided to stop insuring residential mortgages on properties with PACE assessments (commercial properties were unaffected). Lots of lawsuits were filed, but the West Coast version went the farthest. Judge Claudia Wilken ordered FHFA in 2012 to begin a rule-making process to justify the agency's action, although she allowed the present policy to stay in place (Jayni wrote about Berkeley Law's comments submitted in this process). Today the Ninth Circuit ruled that the courts have no jurisdiction to interfere with FHF A's decision because the agency acted as a "conservator" of Fannie and Freddie, rather than as a regulator. The conservator role has been well established in the context of the FDIC and private banks, but not for FHF A and Freddie and Frannie, which are government-sponsored entities. Plaintiffs had argued that 1) FHF A never invoked the "conservator" role when they issued the original 2010 policy directives and that 2) the agency's PACE policy involved substantive regulations not fit for the more limited statutory powers of a conservator. The court disagreed, finding that the policy was meant to shield taxpayers from liability over losses from foreclosed homes: in the event of a foreclosure, municipal governments would get paid back on their PACE assessments before Fannie and Freddie. This ruling has the unfortunate outcome of hindering an important municipal financing program for residential properties that will benefit the environment and economy (reduced utility bills and residential construction/retrofit jobs). And the scope of the conservator role, as the ninth circuit has now defined it (and as the Second and Eleventh Circuits also ruled in their PACE cases), allows FHF A to make almost any decision it wants without public input or judicial review, as long as FHF A can document that the policy saves the agency money and therefore fits its role as a "conservator." The immediate question for PACE backers will be whether of not FHF A continues its rule- making process that began in 2012 in response to the now-dismissed lawsuit. Legally, it can now abandon that effort, but it may be more difficult politically to do so. Otherwise, PACE backers will either have to hope for congressional action to overturn the FHF A policy or for the Obama Administration to make a change at FHF A. Either option would be welcome, given this decision today.