NOTE: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENow for more information about PACE financing and a comprehensive list of all PACE programs across the country.
Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money from the local government to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. In June 2015, Alabama enacted legislation that authorized local governments to establish such program. Not all local governments in Alabama offer PACE financing; contact your local government to check if it has established a PACE financing program.
The Property Insurance and Energy Reduction Act of Alabama (Act 2015-494) allows a county, municipality, or improvement district to adopt a program to issue bonds, notes, or other financing methods to finance energy efficiency improvements or energy resiliency projects to properties through assessments on the property tax bill. Qualifying energy efficiency projects include, but not limited to, air sealing, insulation, installation of energy efficiency heating, cooling, or ventilation systems, building modifications, electric vehicle charging equipment, lighting, or other improvements that lead to demonstrable savings. Installation of such qualifying measures should be performed by licensed or certified contractors registered in the State.
In order to establish a program, the appropriate local governing bodies are required to hold a public hearing and adopt a resolution establishing a program including its terms and conditions. This program does not apply to residential property consisting less than five units, or individual residential units to condominiums or cooperatives. Total project costs cannot exceed 20% of the just value of the real property as determined by the county property appraiser. This limit, however, can be exceed if the audit demonstrates that the annual energy or insurance savings from to the improvement exceeds the annual repayment amount of the non-ad valoreum assessment.
To qualify for the program, the real property owner should provide a copy of written consent and subordination agreement signed by the holder of each existing mortgage or other lien on the real property stating that the mortgage or other lienholder consents to the imposition of the assessment, and that the priority of the mortgage or other lien is subordinated to the assessment lien.
The Governor may assign an existing state agency to administer the program. The state agency shall adopt reasonable rules, and develop guidances consistent with the law and perform other duties to implement the program. The state agency is also authorized to develop a statewide program for local government to participate.