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Leon County Business Partner Under Federal Investigation

Posted on October 22, 2017

Leon County Business Partner Under Federal Investigation

Tallahassee Reports has learned that a Leon County business partner, Renovate America, is under investigation by Securities Exchange Commission – an independent agency of the United States federal government – and is responding to questions by the FBI.

Renovate America has said they are not the target of an FBI investigation, but rather assisting the FBI with issues involving subcontractors. As is normally the case, the FBI is not offering comments.

On August 9th, Leon County announced Renovate America was chosen to participate in the residential Property Assessed Clean Energy (PACE) public-private partnership with the Florida Development Finance Corporation (FDFC).

PACE financing allows homeowners to make residential energy efficiency, solar and wind resistance improvements while paying for upgrades over time through their property tax bill. Leon County was one of the first to launch the program.

Renovate America is one of the largest providers of PACE home improvement financing in the nation.

The Wall Street Journal (WSJ) recently reported the PACE program has been “beset by controversy as homeowners have complained that they didn’t understand their loan terms and can’t afford their debt.”

The average PACE loan is $25,000 and is added to a homeowner’s property bill along with their property taxes. Loans have been bundled into bond deals and sold to asset managers and investors.

On August 15th, less than a week after Leon County’s partnership announcement, the WSJ reported that defaults on PACE loans had increased substantially.

However, a spokeswoman for Renovate America said the partial data gathered by the Journal is more negative than what the company is seeing.

On Sept 26th, the WSJ reported that investigators from the FBI and the SEC were looking into business practices at Renovate America Inc.

While the focus of the FBI inquiry was not known, it was reported that the SEC was investigating loan payments Renovate America made for some borrowers who were struggling with their debt.

Securities laws require companies to disclose all information that investors would consider to be material.

Representatives from Renovate America said they have fully disclosed the SEC request to investors beginning in April and we believe this matter is unlikely to have a material effect on our business.

Also, according to the WSJ, former employees have reported that Renovate America engaged in lending to senior citizens who did not understand their loan terms.

On October 3rd, the WSJ reported Renovate America announced a company-wide shake which included the departure of one of its co-founders and the demotion of another from chief executive to a strategy role.

Alice Vickers, an attorney and the director of Florida Alliance for Consumer Protection, a statewide nonpartisan, nonprofit that advocates for consumer protection, highlighted concerns about PACE only days after the Leon County announcement of the Renovate America partnership.

Ms. Vickers wrote:

A PACE loan is usually not a homeowner’s cheapest alternative for financing home improvements. Data on PACE loans in Florida shows an average rate of 8.05 percent on a 20-year loan. A homeowner generally can receive a home equity line of credit or other mortgage re-financing for much less than the cost of a PACE loan.

PACE loans do not provide the consumer protections mandated for a home mortgage or home equity line of credit. There is no requirement for a determination that the homeowner can repay the loan. There are no Truth in Lending disclosures or requirement that the consumer be given a right to rescind the loan. Also, the consumer is not provided the same protection to assert legal claims and defenses.

TR is seeking comments from Leon County officials about the recent revelations and has submitted a records request focused on information about PACE loans made to Leon County residents.

9 Responses to Leon County Business Partner Under Federal Investigation

  1. Franklin Thompson Reply

    October 23, 2017 at 8:15 am

    Sounds similar to mortgage backed securities.

  2. Mike Reply

    October 23, 2017 at 8:26 am

    So, not long after the Aug. 9th choice of Renovate America by Leon County for the PACE program, the attorney for the FL Alliance for Consumer Protection (a nonprofit, nonpartisan consumer protection advocate) writes some very valid concerns about the PACE lending Program. Then, on Sept. 26th the WSJ posts a story that the FBI and SEC were looking into Renovate America’s lending practices. Those two facts would give any common-sense person pause, so…

    One would think that by now, Leon County would at least put Renovate America on “hold” to make any PACE loans in our area, pending the results of the FBI and SEC investigations. If Leon County still allows RA to proceed as usual in the county (with these obvious danger flags on the company), citizens should demand to know why – and seeing all the records and emails regarding the choice of RA by Leon County is a start. I also also would want the name of any and all lobbyists and local businesses associated with RA, to trace those connections.

  3. Snydley Whiplash Reply

    October 23, 2017 at 11:41 am

    PACE was part of an eloberate plan put in place by the Obama administration designed to help tank the economy 1 – 2 years into Hillary’s first term which would have the result of citizens begging the government to totally take over health care resulting in the achievement of the lefty liberal dream of single payor health care forever.
    Only problem Hillary did not win.

  4. Hope Reply

    October 23, 2017 at 12:12 pm

    Great reporting by Tallahassee Reports!

    Did staff or a county commissioner(s) bring this to the table? Did county commissioners vote on this? If so was it unanimous? What was the county staff’s recommendation?

    The county should only be implementing such if this is a great benefit to their citizens and with the “lowest” rate. This is not a benefit, it is a horrible disservice which could cause a citizen hardship…even possibly lose their home. Outrageous!

    This is further evidence why the county manager needs to be replaced and a nationwide search commence immediately (in tandem with the same for the city for the multiple missteps we are all too well aware).

    Again, what players put this in play? As Mike stated,”citizens should demand to know why – and seeing all the records and emails regarding the choice of RA by Leon County is a start. I also also would want the name of any and all lobbyists and local businesses associated with RA, to trace those connections”.

  5. Greg Frost Reply

    October 23, 2017 at 2:54 pm

    Let’s be clear about Renovate America’s interactions with the SEC. Renovate America received a request for information from the SEC in relation to a prior Wall Street Journal story about assistance provided to 86 homeowners — 86 out of more than 105,000 homeowners who have used our financing to make energy, efficiency or resiliency improvements to their homes. The SEC’s request is 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.

    Earlier this month, 40-year financial services industry leader Roy Guthrie became our new CEO, rounding out a new leadership team for the nation’s leading energy efficiency and renewable energy home improvement financing platform. Our founding CEO, JP McNeill, moved into a long-term strategy role, becoming Vice Chair of our Board of Directors. Read more here: https://www.renovateamerica.com/news/press-release/renovate-america-taps-finance-industry-leader-roy-guthrie-as-ceo

    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. We put in place a contractor rating system that has resulted in severing business ties with more than 100 contracting firms. And we successfully pushed for state regulation. Every employee of Renovate America clearly knows that helping homeowners is at the heart of our business and mission.

    Sincerely,
    Greg Frost
    National Communications Director and Spokesperson
    Renovate America

    • Hope Reply

      October 24, 2017 at 9:27 am

      Mr. Frost,

      Thank you for your information, but it did not address any of Alice Vickers’ concerns. Your spin, from a public relations perspective, sadly, is part of the problem. This constant PR hype undermines honesty, integrity, and humanity and has led to the culture here that has put this county in the current state it is in today; such as being number one in crime in the state of Florida, FBI investigations of current elected officials and their business associates, etc. No more PR spin, please!

      Perhaps you could provide the names of the lobbyists hired by Renovate America that interacted with Leon County officials. In addition please provide the list of the acceptable contractors that RA recommends locally in this county.

      Also, please provide testimonials by satisfied customers and specific products you provide to benefit your customers.

      Looking forward to receiving some answers and more information.

      • Jason Reply

        November 17, 2017 at 12:52 pm

        Hope,

        When you get a loan from the bank to get a new roof, does your bank provide you with a list of reputable contractors in your area, with phone numbers and ratings. Does your bank make sure that the price you are being charged for the work is kept to industry standards to avoid price gouging. If you need more information, contact the program. Don’t sit here and bash a company on a forum that you have no idea or information about.

        – person with common sense

  6. Mike Reply

    October 24, 2017 at 11:12 am

    Thanks for your information, Mr. Frost. My own (and I emphasize this is my personal opinion) view is that the PACE program needs to be brought into “loan compliance” with the consumer safeguards That Ms. Vicker specifically names in her 2nd paragraph above. When PACE loans are regulated with the same safeguards that Home Equity Loans and Home Mortgages must contain by law, then I’d say they have as much latitude as any product or service to compete in the marketplace.
    After all, PACE loans are evidently applied through property taxes, so it seems to me that regulations and consumer safeguards need to be applied in compliance with other types of Home Ownership loans.

    One other fact that needs to be taken into account with PACE is that Leon County and Tallahassee Property taxes (and numerous raises in rates) have been a very contentious subject with local citizens, so any program approved by Leon County that is handled through Property Tax payments is bound to be highly suspect. Again, this is strictly my own personal opinion.

  7. Alex Reply

    October 26, 2017 at 6:26 am

    Is Mr. Frost the same person who worked with TPD when Chief Coe was Chief of Police? If so, he was a city employee before he got this job. Interesting!

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