AgdaPkt 2014-09-22 Closed and Joint with SA

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currently a member of CEDA. In order to proceed with implementation of the Figtree PACE, the City Council would be required to adopt a resolution authorizing the City to join CEDA and execute the membership agreement (Attachment 2). Addressing FHFA Regulatory Challenges Assessment liens and the special tax liens, including those placed on properties participating in PACE programs pursuant to AB 811, take priority over private liens such as mortgages, even when the mortgage lien pre-dates the assessment or special tax lien. The priority of PACE liens over pre-existing loans causes concern for Fannie Mae and Freddie Mac, two organizations chartered by Congress to purchase residential mortgages from the original lenders in order to provide greater liquidity in the residential mortgage market. Since 2008, Fannie Mae and Freddie Mac have been under federal conservatorship by the FHFA, and in 2010 the FHFA issued a directive that Fannie Mae and Freddie Mac should take measures to “protect safe and sound operations,” including among other actions, ensuring that their mortgage documents require that a borrower obtain lender consent to put a PACE lien on a property senior to the mortgage. The FHFA directive creates the potential that residential property owners with a mortgage purchased by Fannie Mae or Freddie Mac could violate the terms of the mortgage by entering into the PACE loan, exposing the property owner to the lender exercising its remedies under the mortgage, which might include acceleration of the mortgage. There is also risk that a residential property owner with no outstanding mortgage who wishes to sell a property may be required to pay off a PACE loan in order to sell to a purchaser who wishes to obtain a mortgage meeting Fannie Mae or Freddie Mac requirements. An additional potential action that Fannie Mae or Freddie Mac could consider is assuming the maximum possible PACE loan amount ($200,000) in the determination of mortgage loan to value ratios and debt to income ratios when determining the satisfaction of requirements for qualifying mortgages where PACE programs are in effect. There is no indication that this course of action will be pursued. As previously mentioned, the State has set up a loss reserve fund which requires PACE programs to make Fannie Mae and Freddie Mac whole in any foreclosure for any losses resulting from payment of any PACE assessment paid while in possession of the property and, in any forced sale for unpaid taxes or special assessments, for any losses that result from PACE assessments being paid before the outstanding mortgage. However, on May 1, 2014, FHFA sent a letter to Governor Brown indicating that the PACE reserve fund does not mitigate its concerns, and that the FHFA has not changed its position on PACE contractual assessments. To date, the City is not aware that the FHFA directive has resulted in adverse impact to homeowners. If the FHFA directives were to be implemented, Redwood City could discontinue participation in any PACE programs. The City’s decision to opt out of a particular program would not affect existing financings or financings in progress but would prevent future financings under such program. The City would be required to 9.B. - Page 4