Are PACE bonds about to come back in the US?

The newsletter “Asset-Backed Alert” carried a story on Friday suggesting that the US is about to see a revival of PACE (Property Assessed Clean Energy) municipal bonds, securitizing clean-energy loans to households.

They report that the DBRS rating agency has put aside time to work on being the first to come out with criteria for PACE issues. The agency’s methodology is set for release in the near future. Asset-Backed Alert reports one source as saying “DBRS feels that PACE is an area that shows strong potential. They will eventually get in on rating solar deals, but that is secondary to PACE”.

PACE bonds, where loan payments are collected through municipal taxes, avoiding 'principal, agent' issues, had been touted by many - including the US Department of Energy - as the answer to residential energy efficiency and clean energy financing for households. Some $50 million of bonds had been issued by mid-last year. They also inspired the UK Government's Green Deal scheme for residential energy efficiency financing.

However, as we reported last year, PACE loans were stalled when the Federal Home Loans Agency ruled against them. The PACE Now website reports that a bipartisan Bill is now before Congress that would force Fannie Mae and Freddie Mac to underwrite loans with Pace assessments.

DBRS’ interest appears geared toward winning an assignment from an unidentified municipality in California that’s planning an offering.

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