Green Lending Provides Variety
Many credit unions have found that green loans for energy efficiency or solar projects are good for business, according to a new Filene report titled “Improving Social and Environmental Sustainability: A Credit Union Assessment and Comparison.”
“By embracing sustainability, credit unions have a real opportunity to attract and retain younger members, create innovative loan-growth opportunities and reduce the risk of losing market share to the corporate banking sector,” said Ryan Honeyman, author of the Filene report and president of San Francisco-based Honeyman Sustainability Consulting.
“Energy efficiency, alternative energy and hybrid loans don't replace traditional auto loans and mortgages, but they can help attract younger members who might also take out mortgage and/or auto loans,” Honeyman told CU Times. “Green loans can attract financially strong borrowers, spur membership growth and lead to new growth in solidly performing loans on the balance sheet.”
The number of members seeking loans for environmentally friendly home upgrades and the number of states adopting regulations governing energy efficiency have increased significantly in recent years, according to Vince Passione, CEO of New York-based LendKey, a cloud-based technology platform that facilitates lending services.
“This environmentally conscious trend presents a new opportunity for financial institutions looking to expand their portfolios – green lending,” said Passione.
Garden Savings Federal Credit Union, which already offers student loans through LendKey, recently added green loans, said Michael Powers, a vice president at the $280 million cooperative in Parsippany, N.J.
Before launching a green loan program, Passione advises credit unions to explore how partnerships with government entities, local utilities, contractors and association networks can play a significant role.
For example, the $646 million Self-Help Credit Union in Durham, N.C., recently completed a pilot phase of a home energy lending program to assist members in Greensboro, N.C., where Self-Help does business as Choice Community Credit Union.
“The Choice Community CU home energy lending program has been a successful pilot,” said Melissa Malkin-Weber, sustainability director for Self-Help CU & Ventures Fund. “We leveraged a loan loss reserve fund provided by the city.”
The city also assisted with the marketing, contractor training and quality assurance, the credit union said. So far, about 20 energy loans, ranging from $500 to $10,000, have been made through the program, Malkin-Weber said.
“The loans we’ve made are performing well and more importantly, we used the program to dip our toes in the water for home energy lending,” she said. “Consistent with programs like this one in other cities, volume has been modest, but we see the vision that even though the dollars are small, we are building towards a much more exciting and meaningful capability.”
About 55% of the energy loans were to low-income families, Malkin-Weber said.
“For instance, one member had been without heat for several months until Branch Manager Kevin Roley and Loan Officer Dawn Milchuck qualified her for a loan to repair her broken heat pump,” she explained. “In addition, the city grant provided weatherization services to make her house less leaky and better insulated, so her HVAC system runs more efficiently.”
As a result of the positive feedback on the energy efficiency program, Self-Help recently unveiled a solar energy loan product for homeowners in three North Carolina cities: Asheville, Durham and Carrboro.
For the solar loans, only pre-existing, owner-occupied, single-family residential homes are eligible and property must have passed site assessment by an approved Solarize program before a solar loan application will be taken, the credit union said.
Self-Help offers unsecured or unsecured loans from $500 to $15,000 at the fixed rate of 7.25% to 16 % for up to four years, depending on borrower credit score and the loan amount.
The credit union also offers personal loans for home improvements such as the repair or replacement of home heating, and ventilation and air conditioning equipment, Malkin-Weber said.
In addition, Self-Help is partnering with North Carolina's Radon Office to offer small consumer loans to mitigate radon gas in homes, Malkin-Weber said.
Align Credit Union also recently began offering an energy efficiency loan program. The Lowell, Mass., credit union partnered with Mass Save, an initiative sponsored by Massachusetts’ gas and electric utilities and energy efficiency service providers.
“We are proud to offer these types of programs that provide real financial solutions for people in our community,” Ken Del Rossi, president/CEO of the $545 million cooperative, stated in a press release announcing the new programs.
As a participating lender in Mass Save's HEAT Loan Program, Align provides 0% interest financing on loans up to $15,000 with terms of up to 7 years for qualified improvements such as insulation, high efficiency heating systems, central air conditioning, hot water systems, digital thermostats and ENERGY STAR-qualified replacement windows, the credit union said.
In 2012, Sooper Credit Union became the first lender in the nation to address the community-owned solar panel marketplace with low-interest loans, said Darrell Mann, executive vice president of the $277 million cooperative based in Arvada, Colo.
During the past two years, Sooper has loaned out almost $1 million to about 70 members to utilize solar energy, Mann said.
“We’ve discovered that people interested in clean energy, such as solar, are usually very good borrowers with strong credit,” Mann said.
Sooper collaborated with the Carbondale, Colo.-based Clean Energy Collective to make loans available to members that buy into CEC community-owned solar gardens, located in areas such as Fort Collins, Colorado Springs and Aspen. Home or building ownership is not required.
“One challenge with solar is that a lot of people don't have a suitable space or might not own their home,” Mann said. “For instance, members might rent a condo or apartment so they can't put a solar panel on the roof.”
By partnering with CEC, Sooper can provide a cost-efficient way for members to tap into solar power, he said. “This opens solar accessibility to literally everyone with a utility bill, not just the 15% that own a well-sited home and have the $10,000 to $20,000 needed to purchase a traditional solar system.”
Community solar gardens are more efficient and produce more power than roof-top systems with lower installation and maintenance costs, according to Paul Spencer, founder and CEO of CEC. Spencer said credit union members and other utility customers can obtain economies of scale by investing in solar arrays that are optimally sited for maximum efficiency.
Members can buy a single panel for around $600 or as many as needed to completely power their home or business, the credit union said.
“CEC and Sooper share in marketing efforts by placing ads in green magazines, making appearances at sustainability festivals and spreading the word about the solar program,” Mann said. “We do our own background on how to secure the loans, which requires due diligence. But by partnering with CEC, we can make solar a viable option for more people.”