Press Enterprise article - DA Investigates HERO Program
Riverside County Deputy DA investigates claims/promises made by HERO installers
Published on: Mar 4, 2016
Transcripts - Press Enterprise article - DA Investigates HERO Program
Riverside County DA investigating how contractors pitch HERO program
BY DEBRA GRUSZECKI / STAFF WRITER
Published: June 3, 2015 Updated: June 12, 2015 4:43 p.m.
Riverside County Deputy District Attorney Raymond Ramirez on Wednesday revealed an
investigation is underway over the way consumers are being sold energy-efficient products through
the HERO program.
Ramirez confirmed the probe during a forum hosted by the
Inland Valleys Association of Realtors.
Ramirez, a member of the Riverside County District Attorney’s
Office’s real estate fraud unit since 2006, said the district
attorney has received complaints, and he will be looking
into the way the HERO program has been pitched to
consumers by contractors.
“I do have a reputation for going down rabbit holes,” Ramirez
said in a crowded IVAR meeting room. “This may be one of
He said he wants to determine if consumers are being truly informed about what they’re getting into.
The Home Energy Renovation Opportunity, or HERO, program was launched by the Western
Riverside Council of Governments, or WRCOG. It allows a homeowner to install “green”
improvements at low out-of-pocket costs, but with a payment program attached to a homeowner’s
property tax bill.
The HERO loan can be a blessing to homeowners because so little is required at the point of
installation. The products can lower utility payments and increase the value of the home.
But the loan takes a first-lien position, meaning it has to be paid first if the property is sold or
refinanced. That first position is such a sticking point, the Federal Housing Finance Agency prohibits
Fannie Mae and Freddie Mac from buying mortgages or notes with these types of liens.
It’s complicated home sale and refinancing deals, particularly when lenders refuse to accept a
secondary position and require the HERO assessment to be paid off. Property owners have told
Realtors that they were led to believe the loan stayed with the house when it was sold or refinanced.
Officials with Renovate America, the San Diego company retained by WRCOG to manage the
HERO program, told the audience of about 150 people that the homeowner is asked to sign
paperwork that discloses clearly that the loan may have to be paid in the first-lien position.
How clearly the first-lien requirement is laid out in documents is at the heart of the issue.
Warren Diven, an attorney for WRCOG who volunteered to be part of the forum, gave a review on
law that makes the HERO program legal. And while he confirmed the ban, he said the FHFA has no
direct regulatory authority over state or local government. This program is legal under federal law, he
Diven urged Realtors to join WRCOG in an effort to convince the FHFA to lift its ban.
A Realtor in the audience said he supports any action to create full disclosure for property owners.
That disclosure needs to be set in large, 40-point type, he told Diven. “There seems to be a
disconnect to the end result,” Ruben Hernandez, of EGA Homes, said.
Renovate America officials said contractors who are authorized by HERO to sell the products do get
rigorous training, and must be registered. They have to be bonded and insured.
The company has an entire team that lives with property owners from the cradle to the grave if there
are issues or problems, Scott McKinlay, executive vice president of corporate development, said.
The company in March noted that it had set up a hotline for agents and title company
representatives to call. On Wednesday, Renovate officials said they created the HERO Property
Advisors unit to help close deals and shared the telephone number: 855-HERO-411.
McKinlay said the company is listening carefully to consumers and it has amped up awareness on
disclosures. Renovate is constantly in a state of improvement, he said.
When the meeting was opened for questions or comments, Warren Anderson, CEO of Financial
2000 in Redlands, said the way the program is structured is reminiscent of the subprime crisis –
which attracted young people with no experience in the mortgage world to put people into loans the
consumer did not understand – and that makes him nervous.
Tami Fleming-Maio said she is concerned because the program that’s supposed to serve cash-
strapped people relies on Fannie Mae or Freddie Mac-backed loans to refinance or sell their home.
Hernandez asked if the program could be suspended during the review.
Ramirez said he needs to understand it, first. “I’m a lawyer, and I looked at the documents, and I
don’t know how the consumer can figure this out,” he said. “I need to understand it. I can tell you that
is my commitment: to understand it.”
After the meeting, Ramirez clarified that WRCOG is not under an inquiry.
“We’re inquiring about the program itself,” he said. “The investigation is between the contractor and
homeowner, and whether protections are present for the consumer. It sounds like it’s all being sold
by contractors, but I don’t know if that’s true. I do not know enough about the program to know what
protections are present.”
With respect to the contractors, and representations made to homeowners, Ramirez described the
inquiry as a criminal investigation. Asked to clarify, he said the Contractors State Licensing Board
submitted a report to the district attorney’s office for review.
Because the program is linked to a government entity, Ramirez said, the program should be held to
a higher standard. “Government is there to protect its citizens,” he said. “My questions are more
systemic: What are the checks and balances?”