A promising energy efficiency program could get closer to reaching its massive potential after a federal policy tweak that tempers lenders’ concerns to allow more homeowners to cash in.

Variations of the Property Assessed Clean Energy program, better known as PACE, already exist in more than 30 states. Until now, the program has skewed mainly toward commercial or municipal properties, bogged down by the mortgage industry’s notion that it would hurt lenders.

In general, the framework allows property owners to repay the costs of efficiency and renewable energy upgrades through city-sponsored property tax assessments.

Despite enthusiasm for its residential upside during PACE’s ramp-up in 2008, some mortgage lenders balked at its guidelines. They said payments on PACE assessments would be prioritized before mortgage obligations and limit refinancing options, a perceived threat to their business.

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