The Ninth U.S. Circuit Court of Appeals in San Francisco overruled a district court last Tuesday when it ruled that the Federal Housing Finance Agency (FHFA) does not have to allow Fannie Mae and Freddie Mac to underwrite mortgages for homes with Property Assessed Clean Energy (PACE) loans, Bond Buyer reports. Started in Berkeley, California, in 2008, PACE "allows residential and commercial property owners to use municipal bonds to finance energy efficiency and water conservation projects." Expressing concern over the fact that because "PACE liens are senior to the mortgage," the PACE lender would "be paid ahead of the bank, or Fannie or Freddie, in the case of foreclosure," FHFA effectively halted the program on the residential side in July 2010, the article said. PACE programs have emerged throughout the country to fund commercial, industrial and governmental projects, but FHFA’s position has blocked the use of PACE for residential projects.