(CN) - A federal housing agency had every right to deny mortgage relief for properties that are encumbered by energy projects, the 9th Circuit ruled Tuesday.
The federal appeals court in San Francisco dismissed a lawsuit claiming against the Federal Housing Finance Agency (FHFA), which has authority over the Federal National Housing Association (Fannie Mae) and the Federal Loan Mortgage Corporation (Freddie Mac).
With the American Recovery and Reinvestment Act of 2008, Congress created the Property Assessed Clean Energy (PACE) program to let property owners pay back loans from the government through property assessments secured by a lien that takes priority over any mortgage loan. The program was designed to assist local governments with energy conservation and alternative energy projects.
California, Sonoma and Placer counties, the city of Palm Desert, and the Sierra Club filed suit in 2010 after FHFA decided not to purchase what it deemed to be overly risky mortgages on properties involved in the program.
PACE proponents said the agency had the program and then improperly adopted a policy against it.
In an August 2012 ruling out of Oakland, Calif., U.S. District Judge Claudia Wilken ordered the agency to complete formal "notice-and-comment rulemaking" on the issue within 210 days. The FHFA appealed to 9th Circuit, where it won a complete reversal on Tuesday.
"We now conclude that FHFA's decision to cease purchasing mortgages on PACE-encumbered properties is a lawful exercise of its statutory authority as conservator of the enterprises," Judge Mary Murguia wrote for a three-judge panel.
Since such actions are not reviewable by the court, the 9th Circuit vacated the injunction and dismissed the case entirely.
"The enterprises' business is to purchase and securitize mortgages, and FHFA carries on that business when it weighs the relative risks and benefits of purchasing classes of mortgages for investment," Murguia wrote. "When FHFA decides not to purchase a class of mortgages that it believes pose excessive risk, it is attempting to preserve and conserve the enterprises' assets and property. Indeed, careful management of its mortgage purchase decisions appears to be the only way FHFA can avoid the financial problems which precipitated the enterprises' conservatorship."
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