HERO Loans Bilk Borrowers with Excessive Charges, Class Action Claims

A class action lawsuit filed by a homeowner from Riverside County, Calif. says Renovate America’s Home Energy Renovation Opportunity Loan program has been deceptively overcharging borrowers.

Plaintiff George Loya accuses defendants Renovate America Inc. and Western Riverside Council of Governments of harming HERO Loan borrowers through the use of several different false and deceptive practices. He says Renovate America has been charging excessive interest, penalties, closing costs, administrative fees, and compound interest.

He also says Renovate America has failed to credit borrowers for payments made on their HERO Loans until long after those payments have been made. These and other allegedly deceptive practices have harmed an entire Class of California homeowners, Loya claims.

According to the class action lawsuit, the HERO Loan program falls under California’s Property Assessed Clean Energy program, or PACE.

The PACE program allows local governments to contract with property owners to finance improvements to real property that promote energy efficiency or water conservation. Loans under the PACE program are secured by creating a lien against the property. Repayment of the loans is administered by the county tax collector.

Loya says defendant Renovate America created the HERO Loan program to issue PACE loans for residential properties. The HERO Loan program is designed to help fund home improvements that boost energy efficiency for low and middle income homeowners who could not otherwise afford to make those improvements.

Renovate America is authorized to administer the PACE loan program in Riverside County, Calif. through an agreement with defendant Western Riverside Council of Governments, Loya says.

According to the HERO Loan class action lawsuit, Renovate America encourages contractors to induce potential borrowers to borrow as much as they can, regardless of the actual costs of the improvements.

Renovate America also provides contractors with allegedly misleading “talking points” to induce more borrowing, Loya says. For example, contractors may advise prospective borrowers that if the property is sold, any remaining balance on the HERO Loan can be passed on to the new owner.

However, Loya points out that neither Fannie Mae, Freddie Mac, the Federal Housing Authority, nor the VA home loan program will purchase mortgages on any property encumbered with an existing PACE loan.

Loya proposes to represent a plaintiff Class consisting of all persons who contracted with the Western Riverside Council of Governments for a HERO Loan on their principal dwelling in which the disclosed administrative fee was equal to or exceeded 5.7 percent.

He seeks an award of damages and restitution of all funds the defendants improperly obtained through the allegedly deceptive acts, plus an award of court costs and attorneys’ fees.

Loya is represented by Rachele R. Rickert, Betsy C. Manifold, Mark C. Rifkin, Janine Pollack, and Randall S. Newman of Wolf Haldenstein Adler Freeman & Herz LLP and by Lee Shalov of McLaughlin & Stern LLP.

The HERO Loan Deceptive Practices Class Action Lawsuit is George Loya v. Western Riverside Council of Governments, et al., Case No. 5:16-cv-02478, in the U.S. District Court for the Central District of California.

UPDATE: On Dec. 6, 2016, after publishing this article, Greg Frost, National Communications Director & Spokesperson for Renovate America, emailed Top Class Actions with their official response. We appreciate Renovate America reaching out to us so we can update this article with their position.

“The complaint in the California lawsuit concerns how Property Assessed Clean Energy (PACE) works, and questions some technical aspects of how information is provided to homeowners. We take our commitment to compliance with laws, rules and regulations, and to consumer protection, very seriously, and we strive to exceed all applicable requirements and best practices. We find no merit in the allegations in the complaints. We intend to defend PACE, our company and the program vigorously.”

UPDATE 2: On July 17, 2017, a California federal judge dismissed all federal claims against the defendants. The remaining state claims were remanded back to state court.