LA County settles PACE loan lawsuits; affected homeowners to receive millions

It wasn't until 2018, following passage of state reform legislation, that lenders in California had to conduct an ability-to-repay analysis based on income.

Still, complaints from homeowners continued, including that home improvement contractors charged inflated costs and forged their signatures to get the loans processed.

In 2020, L.A. County shut down its program in part, it said, because it could not be sure there were sufficient protections for consumers.

PACE companies say the vast majority of their customers come away happy and that foreclosures are rare. Some firms have blamed new California consumer protection rules for knocking out too many qualified candidates.

The settlement, preliminarily approved Monday, resolves two lawsuits filed against the county and two of its private lender partners, Renew Financial and Renovate America. The suits allege that the parties committed financial elder abuse and that the private lenders encouraged predatory lending by not considering a consumer's ability to repay while telling contractors how much of a loan a consumer qualified for based on their home equity.

Like the county, Renew Financial continued to deny allegations as part of the settlement. Renovate America has since gone out of business, but previously said it found "no merit" in the allegations.

Under the terms of the settlement, the county will pay $9 million, while Renew Financial will pay $3 million. The amount for attorney and administrative fees will be capped at $2 million, with the rest going to homeowners.

Consumers can receive money if they took out a Renew Financial or Renovate America loan through the county program from March 1, 2015, to March 31, 2018.

The county partnered with a third lender as part of the program, PACE Funding Group, which was not a party to the suits and homeowners with those loans are not entitled to relief.

Homeowners who are eligible will receive extra compensation if their PACE loans caused very large debt burdens. In addition, those with big debt burdens who at the time of origination were 65 and older or had limited English proficiency will receive even more money.

...continued

swipe to next page