Court Permits Foreclosures on Solar Loans

An Orange County Superior Court judge ruled Tuesday that a bank could foreclose on more than 100 Southern California homeowners who alleged that they were defrauded by solar-heating contractors and refused to repay the bank loans they used to buy the solar units.

The decision clears the way for Central Bank of Oakland to proceed with 109 foreclosures in Los Angeles, Orange and Riverside counties against homeowners who claim they were tricked into buying solar units that often did not work.

The homeowners typically took out second mortgages to finance their purchases. When the units allegedly failed, the homeowners complained of improper sales tactics, stopped loan payments and sued the contractors and the bank.

As a result of Tuesday’s decision, the bank can foreclose on those loan recipients who defaulted on payments. Representatives of the bank said Tuesday, however, that they were not certain whether that action would be pursued immediately.

“It’s premature to make a public statement, as we have not seen the decision,” said lawyer Stanley A. Doten.

The ruling, in a lawsuit filed by the Public Interest Homeowners Assn. Inc., was handed down by Orange County Superior Judge Everett W. Dickey, who refused to issue a preliminary injunction against the bank.

“The decision only applies to Central Bank, but they are involved in 50% of the 432 fraud cases we’re representing,” said homeowners association spokesman Joe B. Morgan.

If need be, 80% to 85% of the homeowners involved should have no trouble bringing their loans current, Morgan said, because they have made the equivalent of monthly payments--averaging about $150--into a special trust fund.

The lawsuit was filed against more than 80 solar firms, banks and other financial institutions last year. But Central Bank was singled out as the only financial institution that was actively pursuing foreclosures, according to Arnold H. Dubrow, a lawyer for the association.