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.