Attorneys for a group of homeowners Thursday sued Los Angeles County and two financial providers that the plaintiffs allege saddled them with loans for environmentally friendly home improvements that they cannot afford to repay.
The twin lawsuits, filed in Los Angeles County Superior Court, also name Renovate America and Renew Financial, which partner with the county in offering Property Assessed Clean Energy — PACE — financing for energy-efficiency home projects. PACE allows homeowners to make energy and efficiency improvements and pay for them over time via an additional line item on their property taxes.
The suits seek class-action status on behalf of “thousands of low-income, elderly, and non-English-fluent residents exposed to predatory lending practices,” according to plaintiff attorneys.
According to the complaints, the question of a homeowner’s “ability to repay” was not included in Renovate America’s or Renew Financial’s underwriting standards. Instead, the primary consideration for underwriting a PACE loan is whether there was enough equity in the homeowner’s property to repay the lender if the home is foreclosed upon, the plaintiffs allege.
In a statement, San Diego-based Renovate America said the company has administered PACE in accordance with California law and county requirements, and in many cases “provided consumer protections that exceed both of those standards.”
Additionally, the company states that the complaint faults Renovate America “for not complying with a law that did not take effect until 12 days ago.” The ability-to-pay provision of AB 1284 — which requires lenders to make a “good faith effort” to ensure borrowers have the ability to repay their loans based on income, assets and current debt obligations, rather than on home equity alone — passed with Renovate America’s support and became law on April 1, according to the company.
Lawyers for the plaintiffs contend that L.A. County has been aware of alleged flaws in the PACE system for years.
“Over the last two years, we have been receiving desperate pleas from Los Angeles County homeowners who are facing foreclosure because of a program that was intended to help them,” attorney Jenna Miara said. “They are usually elderly, and disproportionately either African American or Latino. These calls are coming in at epidemic levels, and we hear the same tragic story over and over — homeowners who did not understand what they were signed up for, and who are rarely experiencing any energy savings.”
Colin Bishopp, vice president of Oakland-based Renew Financial, said that while the company does not comment on pending litigation, it has long supported “robust consumer protections” for the PACE industry.
“Consumer complaints represent a small fraction of the many thousands of homeowners who choose PACE financing,” Bishopp said. “When we receive customer complaints, we do our best to resolve the matter as quickly as possible. We are dedicated to serving our customers and proud of our track record.”
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