The Second Circuit Court of Appeals has dismissed two challenges to Property Assessed Clean Energy (PACE) programs, which are operated by local governments and encourage property owners through loans to make home improvements that reduce energy consumption, promote clean energy, create local jobs, and reduce greenhouse gas (GHG) emissions. Town of Babylon v. Fed. Hous. Fin. Agency, No. 11-3408 (2d Cir. 10/24/12); NRDC v. Fed. Hous. Fin. Agency, No. 11-3285 (2d Cir. 10/24/12). In 2010, the Federal Housing Finance Agency (FHFA) and Office of the Comptroller of the Currency (OCC) warned Fannie Mae, Freddie Mac and national banks that PACE loans to homeowners with senior liens might pose risks to the institutions’ own security interests. Plaintiffs sued FHFA and OCC arguing that the warning discourages local participation in PACE initiatives. A district court dismissed the suits, and plaintiffs appealed.
Affirming the district court, the Second Circuit ruled that a 2008 federal law, 12 U.S.C. 4617, establishes FHFA as the federal conservator for Fannie Mae and Freddie Mac, and nothing in that law authorizes judicial review of FHFA decisions. As to OCC, the court held that plaintiffs lack standing under Article III of the Constitution. According to the court, plaintiffs cannot demonstrate redressability— in essence, that the relief sought would resolve the problem—because, even if OCC withdrew its warning, “national banks would remain entirely free to treat PACE-related properties on an unfavorable basis.”