HERO program’s green-energy loans leave homeowners in red, critics say
MENIFEE » As she sought estimates for new windows and attic insulation, Amalitsa Anastasiou said contractors told her about a program that would let her pay for the work over time.
Instead, the 54-year-old Menifee woman — who is disabled, lives alone and cleans houses for a living — said her property tax bill climbed by almost $5,000. And she was approved for a $48,000 loan well beyond her ability to repay.
“I definitely feel taken advantage of,” she said. “I didn’t understand (the loan). The whole process was overwhelming.”
Her loan came from a program called HERO, or Home Energy Renovation Opportunity. HERO is a version of a national program called Property Assessed Clean Energy, or PACE, which helps homeowners pay for solar panels or other energy-wise upgrades in what’s supposed to be a win-win-win for homeowners, contractors and the environment.
But critics allege that HERO and other PACE programs are often deceptively run and let unscrupulous contractors prey on vulnerable homeowners, who are left with insurmountable debt or surprise hurdles when they sell or refinance.
“People (burdened by the loans) are taking out advances on their life insurance and collecting cans on streets to save their homes,” said Jennifer Sperling, an attorney with the Los Angeles-based Bet Tzedek Legal Services who is representing homeowners in two class-action lawsuits against Los Angeles County and two companies — Renovate America and Renew Financial — that the county hired to oversee its PACE programs.
A Renovate America executive and officials with
Western Riverside Council of Governments, which though based in Riverside offers HERO across the state, insist that protecting homeowners has always been a top priority and point to safeguards, from repeated calls to homeowners to make sure they understand their loans to rigorous standards for contractor conduct.
“We believe we’ve set the gold standard for the industry,” said Michael Mildenberger, Renovate America’s chief risk officer.
L.A. County stopped offering PACE loans in May. The county said on its website that, despite safeguards at the state and county level, it “cannot be certain these measures will provide sufficient protection for all consumers.”
Based in San Diego, Renovate America is named in a class-action lawsuit filed in 2018 by Southern California homeowners who alleged the company runs HERO “by materially false and deceptive means,” such as imposing excessive closing costs, double counting and collecting excessive loan fees and secretly calculating compound interest on loans.
“Defendant Renovate America overcharges virtually every cost, fee, and amount due from borrowers in the HERO Loan program to maximize its own profits at the expense of HERO Loan borrowers,” the lawsuit alleges.
While Renovate America denies wrongdoing, a lawsuit settlement is pending in Riverside County Superior Court. Under its terms, the company would agree to pay $2.55 million, with eligible homeowners getting from $4.35 to $242.61, according to a website that outlines the settlement’s terms.
Stacey Tutt, a visiting law professor and director of the Consumer Law Clinic at UC Irvine, said in an email that when she first heard about PACE loans, she “was shocked to learn of such a predatory equity stripping product.”
Tutt’s clinic took referrals about PACE loan problems from other legal services groups when it opened in 2018 and was “quickly overwhelmed.” It’s now involved in seven PACE-related lawsuits in Orange and Los Angeles counties, she wrote.
In 2011, the Western Riverside Council of Governments, a countywide alliance of local governments known as WRCOG, tapped Renovate America to run HERO, which at the time was limited to western Riverside County.
In August 2019, Renovate America — while not admitting wrongdoing — agreed to pay $4 million to settle a civil complaint brought by Riverside County District Attorney Mike Hestrin and five other California district attorneys’ offices that accused the company of violating state consumer-protection laws by not disclosing important information about HERO loans.
Barbara Spoonhour, who recently retired as WRCOG’s deputy executive director for operations, said: “PACE is more stringent now than really any other type of financing that you can get … you can get a credit card a lot easier than you can get PACE financing.”
Casey Dailey, WRCOG’s director of energy and environmental programs, said its management of HERO “has been done under the authority and direction of our executive committee,” which includes county supervisors and city council members.
Is HERO economic boost or misleading scam?
Under a 2008 state law, local governments or public agencies like WRCOG can run programs such as HERO.
When HERO launched in 2011, “we were looking for an economic driver,” Spoonhour said. “It sounded really intriguing to us … to see something that could (improve) the older housing stock.”
WRCOG started offering loans statewide in 2014.
Today, with more than 380 municipalities in California covered, HERO is one of the largest programs of its kind in the United States. According to Mildenberger, more than 77,000 California homes have been improved through HERO, leading to a $2.92 billion economic stimulus and 17,000 new jobs.
According to Dailey, HERO has generated $34 million for WRCOG, its biggest partner, since 2011. It accounted for 13.5% of all WRCOG revenue in fiscal 2017 and 8.5% in fiscal 2018.