Green Home-Renovation Firm Bankrupted by Tougher Rules, Lawsuits
(Bloomberg) -- Renovate America Inc., which lends homeowners money to make “green” improvements such as adding solar panels or energy-efficient windows, filed for bankruptcy as litigation and the Covid-19 pandemic eroded revenue.
Renovate’s lending was part of a government-backed program that lets people finance their loans by adding the payments to their property taxes. But consumer advocates and federal regulators have criticized them as expensive and susceptible to abuse. At least 56 legal cases are pending against San Diego-based Renovate, according to a Chapter 11 filing Monday.
More than 115,000 loans were handed out by Renovate, according to its website. But revenue plummeted 81% between 2016 and last year after new legislation in California established tougher “ability-to-pay” standards for lending, according to a declaration filed by Chief Executive Officer Shawn Stone. Lawsuits have cost about $15 million since the beginning of 2018, Stone wrote.
The Covid-19 pandemic provided the final push into bankruptcy, with financing volume dropping 47% in the first 10 months of 2020 compared with the previous year.
Renovate listed assets of about $103 million and liabilities of about $115 million. The company signed an agreement to sell its assets to Finance of America Mortgage LLC, which will serve as the initial bidder in a court-supervised auction. In the meantime, Finance of America is giving the company a bankruptcy loan, according to the declaration.
Renovate issued loans designed to provide energy savings and lower greenhouse gas emissions as part of Property Assessed Clean Energy programs authorized by state or local governments.
PACE home improvements, underwritten by Ygrene Energy Fund in California, are expected to reduce electricity consumption by more than 3.6 million megawatt hours and cut greenhouse gas emissions by more than 1.1 million metric tons over the life of the upgrades, according to a University of Southern California study paid for by Ygrene.
The case is Renovate America Inc., 20-13172-LSS, U.S. Bankruptcy Court for the District of Delaware (Delaware)
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