Green lender, Renovate America, in Missouri is cooperating with an FBI investigation into a contractor.

Contractors for Renovate America install energy efficient air conditioner – image courtesy of Renovate America

The Wall Street Journal has reported that the FBI and the Securities and Exchange Commission (SEC) are probing the activities of Renovate America, which provides home loans as part of the Property Assessed Clean Energy program, or PACE.  The loans are often used to install solar panels or replace heating and air-conditioning systems.

In Missouri, they were made available at the residential level in September of 2016.  Since then, Renovate America has financed $10 million in projects for roughly 650 homeowners in the state.

The company strongly asserts that it is not being investigated.

Scott McKinlay, Renovate America’s chief legal officer, said in a statement that “we have been assured that Renovate America is not a target of an FBI investigation. We believe from our discussions with the FBI about its investigation of a contractor with whom we have done business that it is likely our company has come up in the context of those FBI interviews.”

The Wall Street Journal reported last week that the FBI is examining how San Diego based Renovate America trains its sales team and contractors, and how it markets its financing to homeowners.  PACE liens are attached to property taxes, which are in a higher position than a home’s mortgage.

Because of the arrangement, customers who don’t pay PACE loans could face legal exposure.  In an interview with Missourinet, Renovate America spokesperson Ellen Qualls said the lenders haven’t pursued any action against customers.

“I think the most important thing for you to understand is that there have been no foreclosures initiated by any PACE provider in the United States since this started happening in Missouri, California and Florida,” said Qualls.  (Missouri, California and Florida have been the three most active states with PACE loans.)

In California, complaints mounted that too many people had taken out unaffordable loans after contractors had misrepresented how the financing is to be paid back.

Qualls contends the company has implemented measures to address those concerns which are in place in Missouri.  She says they include “know-before-you-owe” disclosures and vigorous follow-up by the company to make sure customers understand the loan’s requirements.

“Not withstanding what the home improvement contractor may have described to them about the financing, we do a live recorded phone call with the homeowner to make sure that they understand all of the terms.”

As the privately financed loans are repaid as line items on property tax bills, Qualls says the company has adopted the practice of contacting customers before first payments are due.

“For more than a year now we’ve been sending a first payment reminder letter to say ‘Remember, this is coming on your property taxes’.  The company doesn’t bill it separately.  It’s billed through the property taxes.  We just want to remind folks to look for that and to save up.”

Renovate America supported legislation passed last month in California designed to boost consumer protections in relation to PACE loans.

The company released a statement last week saying it’s cooperating with an FBI investigation into a contractor that handles PACE loans, and noted it’s no longer doing business with that contractor.

McKinlay told Missourinet that inquiries from both the FBI and the Securities and Exchange Commission are beginning to wrap up.

“The request for documents is nearing an end,” said McKinlay.  “And I think it’s a process of making sure that they have what they want and have what they need.  And we’re cooperating with both of those agencies.”

In August, the company’s John Maslowski told Missourinet that over the past two years, Renovate America has put consumer protections in place that have resulted in the company severing business ties with more than 100 contracting firms.

“We have a data driven contractor quality rating system, that monitors their performance.  It looks at customer satisfaction from you or I the property owner.  If there are questions or complaints coming from property owners, we look at how quickly they resolve them.”

The company says it has amended more than 60 specific processes to ensure homeowners have a better understanding of their PACE financing obligation.

With its latest roll-out in Missouri, Renovate America says it’s loans are now available to 129,000 new households.

PACE programs are typically established by local governments.  Renovate America’s financing has been available in the Kansas City, Springfield and St. Louis areas since last September, and is now active in mid Missouri’s Columbia and Jefferson City.