Suit says PACE loan provider hid risks

Ygrene vows to fight charge ‘vigorously’

A company that finances home improvement projects in South Florida with no credit checks and no money down is the subject of a federal court lawsuit charging it fails to adequately disclose important limitations of the loans to its consumers.

The defendants, Ygrene Energy Fund and Ygrene Energy Fund Florida, are among the nation’s leading providers of financing for Property Assessed Clean Energy (PACE) energy efficiency and hurricane-hardening upgrades, such as new roofs, solar energy systems, impact windows or water heaters.

Over the past two years, Ygrene and other PACE programs have been approved by dozens of local governments in South Florida to seek repayment through assessments on borrowers’ property tax bills. Ygrene has approved hundreds of loans in the region since 2015, including about 1,600 in Broward County, according to the county’s official records.

The suit, filed in the Northern District of California, where Ygrene Energy Fund is headquartered, accuses the company of fraudulent inducement, negligence, unjust enrichment, negligent misrepresentation, and violation of consumer protection laws in Florida and California.

It seeks damages for the plaintiffs and prominent disclosure of risks the suit asserts are inadequately disclosed to borrowers, including that their loans are recorded as liens against their properties and that in nearly all cases must be repaid in full before a lender will approve a new loan on the home.

Ygrene, through its public relations agency, issued a statement saying that it acknowledges the seriousness of the allegations but vowed to “vigorously defend ourselves as the suit lacks merit.

“Complete transparency and a commitment to consumer disclosure, protection, and education are of utmost importance to Ygrene,” the response states. “In partnership with more than 350 state and local governments, we hold ourselves to the highest ethical standards.”

The suit states that Ygrene incorrectly markets its loans as transferable with the house, and in marketing materials “goes so far as to say, ‘It’s as if your house is borrowing the money.’”

Not only will almost all consumers be required to pay off their loans, some will be required to pay a 5 percent prepayment penalty while others will be charged a “pre-payment waiver fee” at closing to avoid the penalty, the suit charges.

Prepayment will be necessary, the suit says, because conventional lenders refuse to provide loans on properties encumbered by Ygrene’s PACE loans. The loans occupy “first lien” status — meaning that if a foreclosure occurs, PACE lenders are in line to get paid off before mortgage lenders.

The Federal Housing Finance