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Town sues lenders threatening pioneering energy program.

The Town of Bablylon, NY, is suing lenders whose refusal to grant loans to green borrowers could cause a pioneering energy program to wither away.

Law firm Goldberg & Connolly announced it has filed an action on behalf of the Town of Babylon against the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), the Federal Housing Finance Agency (FHFA), and others in the United States District Court, Eastern District of New York.

The Town of Babylon's action seeks a judicial declaration that recent changes to the mortgage underwriting guidelines of these federal agencies seriously impacts the continued viability of Babylon's innovative Green Homes Program (LIGH).

The lawsuit seeks to vacate and set aside their violation of federal and state laws and the Tenth Amendment of the U.S. Constitution due to the alleged overreaching of the federal defendants into state and local government matters.

"We applaud the Town of Babylon for seeking federal court intervention to enjoin the federal defendants from blocking the Town's efforts," said Henry L. Goldberg, Babylon Town Attorney in the matter.

"Through its innovative LIGH Program, Babylon is helping both its residents and the environment and taking a leadership role by providing a national model for fostering a cleaner environment."

Since 2008, Babylon's LIGH program has provided hundreds of modest loans to residents for home energy improvements including more efficient heating systems and insulation.

The program has resulted in over 600 greener, more efficient homes, reduced carbon emissions by approximately four tons and reduced home operating costs. The program creates a significant number of green jobs in the community and reduces annual energy bills by $1,000 on average.

The highly successful program provides residents with repayment terms of up to 10 years. In most instances, the cost savings as a result of reduced energy use are in excess of the monthly repayment amount.

In July 2010, FHFA instructed Fannie Mae and Freddie Mac to restrict mortgage lending opportunities to homeowners in municipalities that offer home energy retrofit programs, including LIGH or PACE. Now, many national banks also refuse mortgages to borrowers in these areas.

Both banks and the federal mortgage agencies claim improvement assessments are allegedly detrimental to the banks by increasing their risk because LIGH or PACE has first repayment priority before a new or existing mortgage.

Babylon contends that their modest loans, averaging about nine thousand dollars, do not pose any real risk to the lender due to the reduction in the homeowner's energy costs and the increase in the value of the improved home, which would actually be a benefit to the mortgage banks.

If the lawsuit is not successful, the restriction of mortgages to LIGH or PACE municipalities may lead to an end for these successful energy saving programs.
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Comment:Town sues lenders threatening pioneering energy program.
Publication:Real Estate Weekly
Date:Nov 17, 2010
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