The Risks of Energy Efficient Loans

Robert Unser is a 74-year-old cancer survivor with cognitive disabilities and a big dilemma.

He has four so-called Property Assessment Clean Energy loans he can’t pay back and four liens on his home.

“PACE loans are energy efficiency loans that are used to finance only energy efficiency home projects,” said San Diego Legal Aid Society lawyer Katy Box, who represents Unser.

She said the high-interest, high-fee loans are peddled door to door and financed through a first-priority tax lien on a homeowner’s property.

“That means that the lien gets priority above any mortgage, above basically any other lien on the property,” Box said.

Homeowners across the state have complained to prosecutors and groups like the San Diego Legal Aid Society about some PACE lenders. Thousands of PACE borrowers have said they didn’t understand the terms and are now saddled with loans they can’t afford to pay back.

California Attorney General Xavier Becerra said the elderly are easy targets for unscrupulous lending.

“They’re essentially sitting on a gold mine,” Becerra said. “Chances are they probably paid off most of the mortgage, and so they have a great amount of equity in that home.”

San Diego County prosecutor Valerie Tanney said repayment of PACE loans through property taxes backed by liens puts the elderly especially at risk.

“With seniors to the extent they have less capacity to understand what this will cost them, then they’re in a danger of losing their homes,” she said.

In the case of Unser, it’s both.

Unser has almost lost his home once. He lives on $11,000 in annual Social Security income. But because of the PACE loans, he’s seen his yearly property taxes jump from $300 to $17,000.

Unser appeared uncertain about how he ended up with four PACE loans.

Robert Unser’s San Diego home, Sept. 27, 2018. (Amita Sharma/KPBS)

“I don’t know where it came from,” he said haltingly. “There was one bank that wanted me to take out a loan. I said, `Give me a few days.’ He wanted me to sign the thing uh, uh, I forget.”

Lawyer Katy Box has filed a lawsuit on behalf of Unser against PACE loan providers Renovate America and Renew Financial, alleging fraud and breach of contract. The complaint is one of several that have been filed against the two loan providers, including class actions on behalf of Los Angeles County homeowners.

Colin Bishopp, Renew Financial vice president of corporate communications, said in a written statement, “Over the past decade, we’ve helped more than 90,000 homeowners to make critical home upgrades that enable their families to live more efficiently, comfortably and securely.”

“Customer complaints represent a small fraction of the many thousands of homeowners who choose our home improvement financing. When we receive a complaint, we do our best to resolve the matter as quickly as possible. We are dedicated to serving our customers and proud of our track record.”

Renovate America also released the following statement: “PACE financing has always been subject to underwriting criteria established by the state of California, and we have consistently complied with those standards. In fact, Renovate America led efforts to pass new laws that strengthened PACE financing by requiring income verification as part of the approval process.”

Representatives from both institutions declined to comment specifically on the Unser case because it’s in litigation, although Renovate America called Unser’s lawsuit meritless.

Box disagreed.

“It’s very apparent from speaking with him that he doesn’t understand these loans,” she said. “He doesn’t understand the contracts he entered into. He doesn’t understand who he owes money to. He doesn’t know why he owes the money.”

And Box said Unser did not need the renovations to his home that the PACE loans were meant to cover.

“He had kitchen remodeling done, and he doesn’t even cook,” she said. “He gets Meals on Wheels. He got solar panels. He lives in his living room, his bed and his chair and his TV are in his living room so I can’t imagine he uses that much power to have a need for solar panels.”

Box said Unser is the one who brought the PACE loan contractors into his world.

“He is lonely and everyone that knocks on his door, he invites in,” she said. “And they talked him into, `Hey, you need these windows replaced. You need your kitchen remodeled.’ ”

Box said Unser’s PACE loans were finalized with electronic signatures on documents sent to non-existent email accounts. Unser doesn’t have an email address, an internet connection or a cellphone.

“They literally made up a fake email address for him,” she claimed in a lawsuit against Renew Financial and Renovate America.

Laws took effect this year requiring more state oversight of PACE providers. They will have to consider a person’s ability to repay before approving the loans.

But it’s too late to help Unser, who is angry and stressed as his lawsuit plays out.

“This thing has taken a very bad toll on me,” he said. “They’re not helping me. They’re hurting me. They might as well just bury me and be done with it.”

The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting, the James Irvine Foundation and the College Futures Foundation.

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