In March 2010, a consortium of Northern California counties – with Humboldt at the lead – won a piece of federal stimulus dollars to establish a Property Assessed Clean Energy (PACE) program. The PACE program had been pioneered just three years earlier by the Berkeley City Council and had since spread like wildfire throughout the nation. Humboldt County was finally about to get on board.

PACE programs work – or, rather, worked – like this. Say you want to retrofit your home or commercial property to be more energy-efficient. Maybe you wanted to weatherize the place, maybe even put in some solar panels. Well, a lot of times there are big up-front costs to this. Maybe you didn’t have the cash. Through PACE, you’d get a loan from a municipality that would be paid back in installments by adding an extra chunk to your property taxes. If you sold your home, the debt would be transferred with the title, along with the energy-efficiency improvements. This type of financing was immensely popular: Twenty-two states had passed legislation allowing municipalities to set up such programs.

But soon after Humboldt won its small pot of start-up funds, the Federal Housing Finance Agency – the government body that regulates the massive quasi-governmental Freddie Mac and Fannie Mae mortgage lenders – started to express qualms. The agency’s issue was that the PACE lien hops in front of mortgage lenders. If a PACE lendee is foreclosed upon, the government gets paid off before the mortgage lenders do. (See this Wall Street Journal article for a good rundown on the FHFA’s objections.) Finally, in July of last year, Freddie Mac and Fannie Mae announced that they would not provide financing for any homes in areas that had set up a PACE program. Since those agencies control such a huge percentage of the mortgage market, this essentially put the whole system on hold.

Today, Rep. Mike Thompson and two Republican colleagues – Dan Lungren of California and Nan Hayworth of New York – introduced legislation that would, in a nutshell, force Freddie and Fannie to suck it up: “The PACE Protection Act of 2011.” In a conference call this morning, Thompson said that with the bipartisan support behind the legislation, he expected that the bill was “going to sail” through Congress.

Why are Republicans on board? Surely it helps that PACE can be sold as a private-sector thing: Thompson’s press release on the legislation claims, somewhat disingenuously, that PACE programs operate “without any government subsidies or taxes.” California spent $50 million of its ARRA funding to jumpstart municipal PACE programs in the state, and some government agency is always going to be writing the checks to contractors and building suppliers, even it it’s pretty certain that PACE participants are going to pay them back, one way or another.

Apart from that, though, it’s pretty clear that PACE programs are an incredibly effective way to keep builders and contractors in business throughout the housing slump. Sonoma County Supervisor Valerie Brown participated in this morning’s conference call alongside the sponsors of the bill; she said that her county, which had one of the largest PACE programs in the state, actually saw an increase in construction jobs during the bust, due mostly to the 1,500 PACE projects the county sponsored. “Frankly, it’s hard to figure out why someone would be opposed to this,” Lungren said.

But all three congressfolk in the conference call continued to direct plenty of bile toward Freddie and Fannie. The current bill, Thompson said, results from the fact that the lenders and their regulator declined to participate in undertaking what he characterized as simple administrative remedies that would have allowed PACE programs to continue. Perhaps why the legislation, on its face, seems to do little to address the agencies’ concerns, apart from assuring that borrowers are sufficiently creditworthy and own enough equity in their homes to make default seem unlikely.

Read the text of the proposed legislation here (.pdf).