JEFFERSON CITY, Mo. – Utilizing green energy technologies is getting easier, but new information about an FBI inquiry into a California contractor who has worked with the largest provider of energy-saving home improvement loans has raised questions.
According to the Wall Street Journal, the Federal Bureau of Investigation and Securities and Exchange Commission are reportedly inquiring about the business operations of Renovate America, the nation’s largest green lender for loans as part of the Property Assessed Clean Energy (PACE) program.
Those loans allow homeowners to get financing in order to make improvements to their homes to help increase the home’s energy efficiency, most often used to add solar panels to homes. Property owners receive the money upfront to perform those renovations and then pay off that financing through their property tax bill.
FBI agents are seeking documents that show how Renovate America marketed its financing to homeowners, trained its sales force and outside contractors, and communicated with investors. The FBI also is conducting interviews of people familiar with the company, according to the people who have been interviewed.
The SEC, on the other hand, is looking into how the company handled its loan payments for certain borrowers.
The company, however, says that they are not the subject of an investigation at this time, but “are fully cooperating with an FBI investigation into a contractor and its affiliated entities who offered their home-improvement customers financing from several Property Assessed Clean Energy administrators, including Renovate America.”
“This contractor and its entities were never employed by Renovate America, and our company no longer does business with them,” the company added in their statement. “In conversations with federal law-enforcement authorities and prosecutors as recently as this past week, we have been repeatedly assured that Renovate America is not a subject or target of that or any federal investigation.”
According to the Department of Housing and Urban Development, PACE can vary from state-to-state but typically allows homeowners to finance energy efficiency improvements for up to 20 years. But the program has also been controversial in practice because, in some states, PACE liens are given super-priority status about the home’s mortgage.
The program can also generate revenue for some local governments. County Collectors may recieve fees for collecting loan payments and turning them over to lenders, similar to many other special assessments. If a PACE bill goes unpaid, the homeowner could potentially lose their homes to foreclosure, though the three major lenders in the U.S. say they haven’t foreclosed on anyone for not paying an assessment.
Renovate America has been operating in Missouri since 2016. The company in July 2017 announced that their HERO program has financed more than $10 million in energy-saving home improvements for nearly 650 customers. They also stated that the program is now available to nearly half of Missouri households in more than 220 communities. The company also estimated that its activity has led to the creation of more than 80 new jobs in Missouri and more than $17 million in economic activity.
Renovate America released the following statement:
Renovate America seeks to lead the home-improvement industry in protecting consumers and in tightening standards for contractors with whom we do business. We are fully cooperating with an FBI investigation into a contractor and its affiliated entities who offered their home-improvement customers financing from several Property Assessed Clean Energy (PACE) administrators, including Renovate America. This contractor and its entities were never employed by Renovate America, and our company no longer does business with them. In conversations with federal law-enforcement authorities and prosecutors as recently as this past week, we have been repeatedly assured that Renovate America is not a subject or target of that or any federal investigation.
How contractors market their services has long been an issue in home improvement, which is why Renovate America helped lead in working with consumer advocates, environmental organizations, and local governments a successful legislative effort this year to create a comprehensive regulatory and consumer-protection framework in California, where the bulk of PACE home-improvement financing is done. Among the provisions in the bills that legislators overwhelmingly approved were new regulations on contractor marketing, training and licensing requirements, and the accountability of PACE providers for how contractors introduce the financing to homeowners.
With the legislation just passed in California, the PACE product has fundamentally changed in its largest market, requiring income-based underwriting and a determination of a homeowner’s ability to pay, and licenses PACE providers contingent on their compliance with a robust statutory consumer protection framework.
Finally, Renovate America has received a request for information from the Securities and Exchange Commission in relation to a prior Wall Street Journal story about assistance provided to 86 homeowners — something that we disclosed to investors and which was included in presale reports by rating agencies Kroll and DBRS in April and July. We are cooperating with the information request and believe it is unlikely to have a material effect on the business.
Over the last two years, Renovate America has amended more than 60 specific processes in our business to better ensure homeowners understand their PACE financing obligation, put in place a contractor rating system that has resulted in severing business ties with more than 100 contracting firms, and have pushed for state regulation. Every employee of Renovate America clearly knows that helping homeowners is at the heart of our business and mission.
Benjamin Peters was a reporter for The Missouri Times and Missouri Times Magazine and also produced the #MoLeg Podcast. He joined The Missouri Times in 2016 after working as a sports editor and TV news producer in mid-Missouri. Benjamin is a graduate of Missouri State University in Springfield.
