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HERO program’s green-energy loans leave Southern California homeowners in red, critics say

As she sought estimates for new windows and attic insulation, Amalitsa Anastasiou said contractors told her about a program that would let her pay for the work over time.

Instead, the 54-year-old Menifee woman — who is disabled, lives alone and cleans houses for a living — said her property tax bill climbed by almost $5,000. And she was approved for a $48,000 loan well beyond her ability to repay. 

“I definitely feel taken advantage of,” she said. “I didn’t understand (the loan). The whole process was overwhelming.”

Her loan came from a program called HERO, or Home Energy Renovation Opportunity. HERO is a version of a national program called Property Assessed Clean Energy, or PACE, which helps homeowners pay for solar panels or other energy-wise upgrades in what’s supposed to be a win-win-win for homeowners, contractors and the environment.

But critics allege that HERO and other PACE programs are often deceptively run and let unscrupulous contractors prey on vulnerable homeowners, who are left with insurmountable debt or surprise hurdles when they sell or refinance.

“People (burdened by the loans) are taking out advances on their life insurance and collecting cans on streets to save their homes,” said Jennifer Sperling, an attorney with the Los Angeles-based Bet Tzedek Legal Services who is representing homeowners in two class-action lawsuits against Los Angeles County and two companies — Renovate America and Renew Financial — that the county hired to oversee its PACE programs.



A Renovate America executive and officials with Western Riverside Council of Governments, which though based in Riverside offers HERO across the state, insist that protecting homeowners has always been a top priority and point to safeguards, from repeated calls to homeowners to make sure they understand their loans to rigorous standards for contractor conduct.

“We believe we’ve set the gold standard for the industry,” said Michael Mildenberger, Renovate America’s chief risk officer.

L.A. County stopped offering PACE loans in May. The county said on its website that, despite safeguards at the state and county level, it “cannot be certain these measures will provide sufficient protection for all consumers.”

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Based in San Diego, Renovate America is named in a class-action lawsuit filed in 2018 by Southern California homeowners who alleged the company runs HERO “by materially false and deceptive means,” such as imposing excessive closing costs, double counting and collecting excessive loan fees and secretly calculating compound interest on loans.

“Defendant Renovate America overcharges virtually every cost, fee, and amount due from borrowers in the HERO Loan program to maximize its own profits at the expense of HERO Loan borrowers,” the lawsuit alleges.

While Renovate America denies wrongdoing, a lawsuit settlement is pending in Riverside County Superior Court. Under its terms, the company would agree to pay $2.55 million, with eligible homeowners getting from $4.35 to $242.61, according to a website that outlines the settlement’s terms.

Stacey Tutt, a visiting law professor and director of the Consumer Law Clinic at UC Irvine, said in an email that when she first heard about PACE loans, she “was shocked to learn of such a predatory equity stripping product.”

Tutt’s clinic took referrals about PACE loan problems from other legal services groups when it opened in 2018 and was “quickly overwhelmed.” It’s now involved in seven PACE-related lawsuits in Orange and Los Angeles counties, she wrote.

In 2011, the Western Riverside Council of Governments, a countywide alliance of local governments known as WRCOG, tapped Renovate America to run HERO, which at the time was limited to western Riverside County.

In August 2019, Renovate America — while not admitting wrongdoing — agreed to pay $4 million to settle a civil complaint brought by Riverside County District Attorney Mike Hestrin and five other California district attorneys’ offices that accused the company of violating state consumer-protection laws by not disclosing important information about HERO loans.

Barbara Spoonhour, who recently retired as WRCOG’s deputy executive director for operations, said: “PACE is more stringent now than really any other type of financing that you can get … you can get a credit card a lot easier than you can get PACE financing.”

Riverside County Supervisor Kevin Jeffries, who sits on WRCOG’s board, believes the agency ignored red flags about HERO.

The agency, Jeffries said, “should have known what the DA’s office has found and announced. They chose to look the other way. I feel like somebody within the WRCOG structure … needs to be held accountable for putting the blinders on everybody.”

Casey Dailey, WRCOG’s director of energy and environmental programs, said its management of HERO “has been done under the authority and direction of our executive committee,” which includes county supervisors and city council members.

Is HERO economic boost or misleading scam?

Under a 2008 state law, local governments or public agencies like WRCOG can run programs such as HERO.

When HERO launched in 2011, “we were looking for an economic driver,” Spoonhour said. “It sounded really intriguing to us … to see something that could (improve) the older housing stock.”

WRCOG started offering loans statewide in 2014.

Today, with more than 380 municipalities in California covered, HERO is one of the largest programs of its kind in the United States. According to Mildenberger, more than 77,000 California homes have been improved through HERO, leading to a $2.92 billion economic stimulus and 17,000 new jobs.

According to Dailey, HERO has generated $34 million for WRCOG, its biggest partner, since 2011. It accounted for 13.5% of all WRCOG revenue in fiscal 2017 and 8.5% in fiscal 2018.

Assessments for HERO loans, which require no money down, are recorded as property liens and paid with the tax bill. State law requires HERO loans to have priority status, Mildenberger said, and according to Dailey, properties with HERO loans have lower delinquency rates than those without them.

Because loans from HERO and programs like it take first repayment priority, the Federal Housing Finance Agency in 2011 ordered federal mortgage lenders Fannie Mae and Freddie Mac not to buy mortgages encumbered by those loans, according to the class action lawsuit against Renovate America.

Despite this, Renovate America’s website told homeowners that if they hold their homes, “any remaining balance must be legally passed on to the new owner,” the 2018 class-action lawsuit read. In 2015, The Press-Enterprise reported homeowners with outstanding HERO loans ran into problems when they tried to sell or refinance their homes because the loans had to be paid off in full first.

Critics contend that contractors mislead homeowners — especially those who are poor, elderly or don’t speak English as a first language — by touting PACE as a free government program and exaggerating what could be saved on energy bills. Contractors told homeowners to sign computer tablets to check their eligibility when in fact, they were signing up for loans, Sperling alleged.

Loan documents were sent to phony email addresses set up by contractors and never seen by homeowners, said Greg Armstrong, consumer team practice group director for Inland Counties Legal Services Inc.

“There have been several instances where contractors aren’t licensed to do the type of work they’re doing or not licensed at all,” he said.

Program has ‘robust’ safeguards, officials say

For years, a robust system of checks and standards has protected HERO homeowners, Mildenberger, Dailey, and Spoonhour said. Homeowners have always had three days to cancel, Mildenberger said.

In 2013, Renovate America started calling homeowners to make sure they understood loan terms, he said. Renovate America and WRCOG supported state legislation passed in 2016 and 2017 that tightened loan oversight and required these phone calls, Mildenberger and Dailey said.

Contractor oversight is “a core tenet of our program,” Mildenberger said. Renovate America, which has a contractor code of conduct, routinely checks contractors’ licenses and rejects those who aren’t in good standing and since 2015, more than 270 contractors have been kicked out, he said.

A 2016 outside audit found Renovate America complied with WRCOG’s guidelines and consumer protection policies 99% of the time. The complaint rate from HERO homeowners has never been more than 3%, Mildenberger said.

Hestrin, the Riverside County DA, said he learned of HERO after an elderly woman on a fixed income “told me a really sad story about how she had been sort of duped into getting very expensive renovations and solar.”

The investigation grew as Hestrin heard similar tales.

“It just turned into something much bigger than we ever thought it would,” said Hestrin, who praised Renovate America for cooperating with the probe.

Mildenberger called the settlement a cooperative effort that “really codified many of the things that Renovate America had been proactive in voluntarily implementing and we believe really sets the standard for the industry going forward.”

So why did Renovate America settle the district attorneys’ complaint if protections were in place all along?

Mildenberger answered by saying that “there have been some homeowners who maybe didn’t fully understand the program or the process, and even though that’s happened in a very small percentage of the time … we still strive to help those homeowners and bring their issue to some closure, some resolution that’s acceptable to them.”

Tutt, Sperling and Armstrong said they continue to hear from homeowners who took on PACE loans and feel they were misled. Renovate America and companies like it “bear ultimate responsibility for these transactions,” Sperling said. “They should be acting with a very high level of care.”

While L.A. County no longer offers the loans, that does nothing to help homeowners already struggling with loan payments, Sperling said, adding that other public agencies offer the loans in L.A. County.

To prevent future problems, Tutt wrote that better consumer protections are needed, such as banning electronic loan signatures and requiring finalized permits, energy audits and inspections before funds are disbursed.

WRCOG plans to continue offering HERO loans.

“We’re proud of where we are with the HERO program,” Spoonhour said.


Riverside County homeowners with HERO loans who are seeking legal advice about their rights and potential remedies can contact the Riverside County District Attorney’s Office.

Phone: 951-955-5400


Information on the proposed settlement of the class-action lawsuit against Renovate America in Riverside County Superior Court can be found online at:

Los Angeles County homeowners with PACE loan problems can contact the county’s Department of Business and Consumer Affairs.

Phone: 800-593-8222



Complaints also can be filed with the state Department of Business Oversight ( or the Contractors State License Board (

Source: Orange County Register

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