EAGLE, Colo. - While the nation's biggest buyers of home loans are fighting with many of the country's highest-profile state and federal politicians over something called "property assessed clean energy" loans, Eagle County officials are getting ready to launch their own program.
Voters in Eagle, Pitkin and Gunnison counties last year approved creating an "energy smart loan" program similar to one in Boulder County. That program allows homeowners to borrow money at relatively low interest rates to finance energy-efficient home improvements.
While local officials were working to create the program, the nation's two biggest buyers of existing mortgages, the Federal National Mortgage Association - Fannie Mae - and Freddie Mac - the Federal National Mortgage Association - issued letters that they wouldn't buy home loans encumbered by the "smart loans." That's because the home improvement loans will be repaid through an added assessment on the owners property tax bills. That potentially gave another lender first priority in case of default.
The lender letters have created a political firestorm, with politicians from Vice President Joe Biden to California Gov. Arnold Schwarzenegger urging the mortgage buyers to reverse their decision.
While the political battle continues, Eagle County officials have decided to start a smaller version of the program, open only to people whose mortgages aren't held by Fannie or Freddie. The county attorney's office is now drafting language for a disclaimer any loan applicant will have to sign, acknowledging that the smart loan potentially puts the borrower's mortgage status out of compliance with guidelines issued by the mortgage buyers.
And county planner Adam Palmer acknowledged that anyone who sells their home after paying for improvements with a smart loan will probably have to settle that debt before the new buyer can get a mortgage.
"I'd expect that to happen more often than not until the program matures," Palmer said.
But, Palmer said, he and other smart loan advocates believe making energy-efficient home improvements will be a good thing for both buyers and sellers down the road, because, at least in theory, those improvements will over time pay for themselves in utility-bill savings.
Local mortgage broker Chris Neuswanger has been skeptical about the program since it was first proposed last year. Neuswanger said he was encouraged to hear the county will ask borrowers to sign disclosure letters before they can get a smart loan.
"It's good the county realizes the implications of the program," Neuswanger said. "I hope borrowers understand what they're signing."