Digital Federal Credit Union has teamed up with SunPower Corp. in an agreement that could provide up to $100 million in loans for residential solar projects in the U.S.
The deal calls for the $5 billion DCU in Marlborough, Mass., to serve as the lead originator of loan participations for 36 credit union partners formed to support SunPower’s residential loan program. Eligible homeowners who join the credit union can receive a loan of up to $50,000 for a high-efficiency solar power system. Available for terms up to 20 years, DCU said borrowers may also be eligible for a 30% federal tax credit for the installation of solar power systems.
The idea of partnering with the San Jose, Calif.-based SunPower sprang from a 2012 meeting with credit unions that are members of a Callahan & Associates’ industry group, said Craig Roy, senior vice president of retail lending at DCU.
A credit union executive at that meeting talked about solar lending and how it had benefited members. The executive also said solar loan borrowers tended to be high quality, with stellar credit scores.
Some internal issues at the credit union prevented the program going forward, Roy said. Others in the Callahan group were intrigued by what they heard and expressed interest in exploring the idea of a loan participation consortium.
“We spent the better part of a year looking at the possibilities,” Roy recalled. “We wanted to know if this is something good for the members. Certainly, there’s the environmental or green component to this.”
More research was conducted to determine just how competitive solar lending is in the marketplace, Roy said. The group of interested credit unions discovered most financing options offered higher rates, restrictive terms and leasing arrangements.
Roughly five months before DCU and SunPower announced the deal in late September, the group started putting the program together, which included a thorough due diligence vetting of SunPower, Roy said. There was even a tour of the company’s headquarters to watch how the solar panels were constructed.
“We wanted to make sure we were aligning ourselves with the right partner,” Roy said. “We asked a lot of questions about SunPower versus other competitors. We wanted to know about the longevity of solar panels because if we’re making loans up to 20 years, we wanted to make sure the panels would still produce after 20 years.”
SunPower launched in 1985 and has offices in North America, Europe, Australia, Africa and Asia. The company said it is the largest installer of U.S. residential and commercial solar panels with more than 100,000 residential systems installed.
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The partnership with DCU will enhance the SunPower Loan offering by allowing more homeowners to get the most efficient and reliable solar technology available, said SunPower Chief Financial Officer Chuck Boynton, in a statement.
“Once the loan is paid off, the homeowner gets free electricity for the life of the system. If they end up selling their home, they may benefit from increased home value as a result of the solar system on the roof,” Boynton said.
The SunPower loan is available in all 50 states and the District of Columbia, according to the company. SunPower system owners also have a 25-year power and product warranty. In addition to the 30% federal tax credit now available for installing solar power systems, SunPower said there may also be additional incentives offered by states and municipalities.
Roy said five to 10 credit unions have committed to the SunPower loan participation program and others are still considering involvement.
“We’ve made a $100 million commitment around this program. There are estimates that these loans are bringing in $8 million a month for solar financing,” Roy said. “And, when you look at the borrower profiles, they are homeowners and they have high quality credit. These are unsecured loans so you need to make sure you have quality people who have demonstrated a strong credit history.”
The next steps for the SunPower loan participation partnership will include dealer training, Roy said. Web applications will be created for dealers to direct customers to for more information and how to become members of the credit unions involved. At press time, the online effort was scheduled to roll out some time in October.
“DCU’s participation in program is also based on the cooperative principles that are at the foundation of credit unions, and our approach to the development of innovative programs that serve the needs of businesses, consumers and our members,” Roy said.
Jon Jeffreys, vice president of Callahan & Associates, which assisted in negotiating the deal with SunPower, shared Roy’s sentiment.
“Credit unions are working cooperatively to bring value and cost savings to homeowners throughout the country who may significantly lower their utility bill and add value to their home,” Jeffreys said.