By filing a suit on Wednesday, July 14, in an Oakland federal court,California Attorney General Jerry Brown clearly defined the battle lines in a fight that could impact the future of the clean energy industry in California.

The Golden State issuing the mortgage agencies Fannie Mae and Freddie Mac, along withtheir regulator, the Federal Housing Finance Agency (FHFA), for throwing a monkey wrench into Property Assessed Clean Energy (PACE) programs.

Designed to help homeowners finance solar energy systems and otherenergy-saving appliances through their property tax bills, the programsmake it easier for homeowners to invest in things like home solarpanels. Local governments front the homeowners the money for the systems and allow them to pay the loan back through special assessments addedto their property bills. The program has become so popular that theObama administration has made available over $150 million in stimulusfunds to help increase the number of local governments offering PACEfinancing options. So far, 22 states have similar systems.

But on July 6, the FHFA crashed the party. Telling the Los Angeles Times that the loans presented “unusual anddifficult risk management challenges” for lenders such as Fannie andFreddie, the FHFA stopped the two lenders from giving out such loans and effectively paused the PACE program. The FHFA said the program violates Fannie’s and Freddie’s standard lending procedures. Without the twolenders that account for approximately half of all U.S. mortgages, theprogram simply won’t be viable.

California is not giving up without a fight. Attorney General Brownsaid the federal government is strangling California’s grassroots energy program and that they have misinterpreted PACE as a loan when it isactually a property tax assessment — the debt stays with the home rather than the person, even if the property is sold.

The repercussions stemming from Fannie and Freddie ditching the PACEprogram could be lasting. California has crafted other state energyprograms to work with PACE. Moreover, the state could lose as much as$100 million in stimulus funds without PACE, which would force hundredsof clean energy companies to start laying off workers.

Grumbling over the program from the two mortgage agencies first arose on May5, when Fannie Mae and Freddie Mac sent a letter to mortgage lenders toremind them that “an energy-related lien may not be senior to anymortgage delivered by Freddie Mac.”

Stay tuned — and if you don’t want PACE programs to go the way of the dinosaurs, speak up and plug in with Vote Solar.

California Sues Feds for Haulting PACE Program