California ex rel. Harris v. Fed. Hous. Fin. Agency
| Decision Date | 09 August 2012 |
| Docket Number | Nos. C 10–03084 CW, C 10–03270 CW, C 10–03317 CW, C 10–04482 CW.,s. C 10–03084 CW, C 10–03270 CW, C 10–03317 CW, C 10–04482 CW. |
| Citation | 894 F.Supp.2d 1205 |
| Parties | People of the State of CALIFORNIA, ex rel. Kamala D. HARRIS, Attorney General, Plaintiff, v. FEDERAL HOUSING FINANCE AGENCY; Edward DeMarco, in his capacity as Acting Director of Federal Housing Finance Agency; Federal Home Loan Mortgage Corporation; Charles E. Haldeman, Jr., in his capacity as Chief Executive Officer of Federal Home Loan Mortgage Corporation; Federal National Mortgage Association; and Michael J. Williams, in his capacity as Chief Executive Officer of Federal National Mortgage Association, Defendants. Sonoma County and Placer County, Plaintiff and Plaintiff–Intervener, v. Federal Housing Finance Agency; Edward DeMarco, in his capacity as Acting Director of Federal Housing Finance Agency; Federal Home Loan Mortgage Corporation; Charles E. Haldeman, Jr., in his capacity as Chief Executive Officer of Federal Home Loan Mortgage Corporation; Federal National Mortgage Association; and Michael J. Williams, in his capacity as Chief Executive Officer of Federal National Mortgage Association, Defendants. Sierra Club, Plaintiff, v. Federal Housing Finance Agency; and Edward DeMarco, in his capacity as Acting Director of Federal Housing Finance Agency, Defendants. City of Palm Desert, Plaintiff, v. Federal Housing Finance Agency; Federal National Mortgage Association; and Federal Home Loan Mortgage Corporation, Defendants. |
| Court | U.S. District Court — Eastern District of California |
OPINION TEXT STARTS HERE
Kenneth P. Alex, Janill L. Richards, California State Attorney General's Office, Oakland, CA, for Plaintiff.
Scott Michael Border, Arnold and Porter LLP, Washington, DC, for Defendants.
Phyllis Crockett Gallagher, Office of the County Counsel, Santa Rosa, CA, for Plaintiff and Plaintiff-Intervener.
Travis Michael Ritchie, San Francisco, CA, for Plaintiff, Sierra Club.
ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT, Docket No. 158, AND DENYING DEFENDANTS' CROSS–MOTION FOR SUMMARY JUDGMENT, Docket No. 168.
California, Sonoma and Placer Counties, the City of Palm Desert and the Sierra Club have sued the Federal Housing Finance Agency (FHFA), its director, the Federal National Housing Association (Fannie Mae) and the Federal Loan Mortgage Corporation (Freddie Mac).1 The lawsuits challenge actions by the FHFA, Fannie Mae and Freddie Mac which have thwarted certain federally funded, state and locally administered initiatives known as Property Assessed Clean Energy (PACE) programs.2 Through PACE programs,state and local governments finance energy conservation property improvements with debt obligations secured by the retrofitted properties. The programs are intended to foster the use of renewable energy, energy and water efficiency, and the creation of jobs. Congress has allocated substantial federal funding to support the expansion of PACE programs nation-wide, and the executive branch of the federal government has engaged in extensive inter-agency coordination efforts to advance the implementation of PACE programs.
Plaintiffs allege that Defendants have violated the Administrative Procedures Act (APA) and the National Environmental Policy Act (NEPA).3 The parties dispute the nature of the debt obligations created by PACE programs, and the extent to which the obligations create risks for secondary mortgage holders, such as Fannie Mae and Freddie Mac, collectively referred to as the Enterprises. The FHFA has taken the position that PACE programs that result in lien obligations which take priority over mortgage loans complicate and make more expensive alienation of the encumbered properties and, thus, pose risk to the security interests of entities that purchase the mortgages for investment purposes. Plaintiffs claim that (1) Defendants disregarded statutorily imposed procedural requirements in adopting rules about the PACE debt obligations; (2) Defendants' rules were substantively unlawful because they were arbitrary and capricious; and (3) the rule-making process failed to comply with environmental laws.
Plaintiffs have jointly moved for summary judgment on all claims. Defendants have opposed the motion and cross-moved for summary judgment. Having considered all of the parties' submissions and oral argument, the Court grants Plaintiffs' motion for summary judgment that Defendants failed to comply with the APA's notice and comment requirement and denies Defendants' cross-motion for summary judgment.
In 2008, California approved legislation to allow cities and counties to create PACE programs, through which property owners may enter into contracts for assessments to finance the installation of energy efficiency or renewable energy improvements that are permanently fixed to residential (including multifamily), commercial, industrial, or other real property.4 AB 811, Ch. 159, Stats. 2008. In many, but not all, PACE programs, property owners repay the assessments with their property taxes, and the liens associated with the assessments are given priority over previously-recorded private liens, such as mortgages.
Also in 2008, Congress enacted the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110–289, 122 Stat. 2654. Through this law, Congress established the FHFA to regulate and oversee the Enterprises, as well as the Federal Home Loan Banks (FHL Banks), which together largely control the country's secondary market for residential mortgages. The HERA amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 12 U.S.C. § 4501 et seq. (Safety and Soundness Act). That Act outlines the regulatory and oversight structure for the Enterprises and the FHL Banks. 12 U.S.C. § 4502(20). As amended by the HERA, the Safety and Soundness Act vests in the FHFA the authority to act as a conservator and receiver for the Enterprises and the FHL Banks, together referred to as the regulated entities. 12 U.S.C. §§ 4511(b); 4617(a).
The Safety and Soundness Act also establishes a tiered system of classification of the capitalization of the regulated entities. As of June 30, 2008, James B. Lockhart III, then director of the FHFA, classified the Enterprises as undercapitalized, pursuant to his discretionary authority under the statute. Pls.' Second Request for Judicial Notice, Ex. 6 at 2. On September 7, 2008, Lockhart placed the Enterprises in FHFA conservatorship. Id.
On February 17, 2009, Congress approved the American Recovery and Reinvestment Act of 2009 (Recovery Act), Public Law 111–5, 123 Stat. 115, which, among other things, allocated eighty billion dollars to projects related to energy and the environment. Plaintiffs' Excerpts of Administrative Record (Plaintiffs' Excerpts), Docket No. 182, Exhibit B, White House Middle Class Task Force and White House Council on Environmental Quality, “Recovery Through Retrofit” Report, October 2009 (Retrofit Report), at 2. The Act provided state and local governments with an “unprecedented opportunity to expand investments in energy retrofits and develop community-based programs on a large scale.” Id.
The California Energy Commission was charged with administering and distributing the Recovery Act funds allocated to the state. According to Karen Douglas, the Chair of the Commission from February 2009 to February 2011, the federal Department of Energy (DOE) allocated $49.6 million in Recovery Act funds for an Energy Efficiency and Conservation Block Grant Program. PACE programs, among other projects, were eligible for block grant funding.
The DOE also allocated to the Energy Commission $226 million in Recovery Act funds for the State Energy Program (SEP). The DOE encouraged states to develop energy strategies that align with the national goals of increasing jobs, reducing the United States' oil dependence through increases in energy efficiency and the deployment of renewable energy technologies, promoting economic vitality through an increase in “green jobs,” and reducing greenhouse gas emissions. On February 10, 2010, the Energy Commission awarded thirty million dollars in SEP funding to five municipal PACE programs. The awards for these PACE programs were expected to leverage $370 million, create 4,353 jobs, save over 336 million kilowatt-hours of energy, and avoid emissions of 187,264 tons of greenhouse gases over the contract period. Douglas Dec. at ¶ 12.
High level federal and state officials participated in efforts to advance the PACE program nation-wide. Beginning in May 2009, the White House Council on Environmental Quality (CEQ) and the Office of the Vice President facilitated an interagency process, involving eleven departments and agencies and six White House Offices,5 to develop recommendations for federal action to increase green job opportunities and boost energy savings by retrofitting homes for energy efficiency. Retrofit Report at 5.
In a letter dated June 18, 2009, Director Lockhart advised banking and creditor trade groups, as well as associations for mortgage regulators, governors and state legislators, of “an emerging trend in state and local financing for residential energy efficiency home improvements.” He explained the FHFA's belief that the programs “will help improve our use of resources and, in the long term, keep down the costs of home ownership,” but that “such programs must be carefully crafted to avoid unintended consequences for homeowners and lenders.” Plaintiffs' Excerpts, Ex. A.
On October 12, 2009, then California Attorney General Edmund G. Brown, Jr., contacted Lockhart regarding his June 18, 2009 letter. The Attorney General emphasized that under California law the debt obligations were properly treated as assessments, and asserted that “proper PACE program design” could overcome the FHFA's concerns. Plaintiffs' Excerpts, Ex. C.
In October of that year, the White–House–led interagency effort culminated in the release of a report entitled, “Recovery Through Retrofit,” announcing a federal proposal to...
To continue reading
Request your trial
-
Oglala Sioux Tribe v. Schwarting
... ... Mims v. Arrow Fin. Servs., U.S. , 132 S.Ct. 740, 748, 181 L.Ed.2d ... See California v. Sierra Club, 451 U.S. 287, 29495, 101 S.Ct ... , 1165 (10th Cir.1999); see, Kaw Nation ex rel. McCauley v. Lujan, 378 F.3d 1139, 1142 (10th ... dismiss have been primarily filed pursuant to Fed.R.Civ.P. 12(b)(6), and because the jurisdictional ... ...
-
Existing Buildings
...Town of Babylon v. Federal Hous. Fin. Agency, 699 F.2d 221 (2d Cir. 2012); California ex rel. Harris v. Federal Hous. Fin. Agency, 894 F. Supp. 2d 1205 (N.D. Cal. 2012). Existing Buildings Page 299 tured with the PACE lien subordinate to the irst mortgage lender’s lien, that makes the progr......