EDITORIAL: Mortgage lenders shouldn't derail green homes

Mortgage giants Fannie Mae and Freddie Mac, who helped cause our economic crisis by paying too little attention to really bad mortgage loans, now want to show belated prudence by bearing down on green homes programs that they say endanger their mortgages.

That would be a shame.

The target now is Property Assessed Clean Energy loans. This technique helps people get past the high original cost of making their houses more energy-efficient: A municipality helps them fund the retrofit, and they pay it back through their property taxes, as they would for sewers.

It's a safe investment for bond-buyers who provided the funding, because the town's retrofit lien takes priority over the mortgage. That priority scares the Federal Housing Finance Agency, which regulates Fannie, Freddie and federal home loan banks. It finds these programs "a significant risk to lenders." So it's tightening up future lending in areas that use PACE. Some have already suspended their programs. Worse yet, the agency may later decide that other local assessments that take priority, like sewers, also threaten its mortgages.

The Town of Babylon, a pioneer, won't stop a program that creates jobs and green homes. It's planning to sue. Rep. Steve Israel (D-Huntington), a key PACE champion, is seeking a compromise. The Housing Finance Agency's caution must not be allowed to kill a green idea and weaken local autonomy. hN