Despite a slow economy and lukewarm results, eco-friendly 'green loans' are still a trend worth chasing for some credit unions.
The $520 million Seattle Metropolitan Credit Union is one such institution, going a step beyond the traditional auto loan rate discount for hybrid vehicles. Instead, the credit union has created a green culture that not only touches several products and services but has also resulted in improved operational efficiencies.
It started a couple of years ago, as part of the credit union's “7 Principles” initiative, which promotes the cooperative philosophy, said Vice President and Chief Marketing Officer Jill Vicente.
“Giving back to the community is one of the initiatives, and we believe preserving our local environment is a big part of that,” she said. “Really, we're doing many of the same things other credit unions are doing, like green car loans and e-statements, but we're also going the extra step to communicate how those actions give back to the local community.”
Loans for EPA-designated green vehicles and approved home improvement projects receive a 25-basis-point discount. Homes receiving the Department of Energy's Energy Star designation or the Leadership in Energy and Environmental Design's LEED green building rating earn $400 off closing costs.
Additionally, for each green loan funded, the credit union plants a tree through the Arbor Day Foundation. The act is commemorated with a certificate for members.
Despite these efforts, response has been slow. So far this year, only 25 auto loans have been “green,” and no energy-efficient home improvement or mortgage loans have been funded, though Vicente reported “there are a few in the pipeline.”
However, the credit union intends to stick with the program, and Vincente sees signs among her membership that it could become more popular soon.
“I think people are starting to look at the relationship they have with their bank, and questioning whether that relationship is trustworthy,” she said. “Convenience used to be the No. 1 factor in choosing a financial institution, but not anymore. If credit unions can successfully market their products and services while demonstrating their principles, it will make an impact.”
North Carolina residents may not share the tree-hugging reputation of their Pacific Northwest counterparts, but the $17 billion State Employees' Credit Union's green mortgage loans have been successful.
Since September 2006, SECU has funded 50 green home loans for a total of $14 million. Spencer Scarboro, senior vice president of mortgage lending, said energy star-rated homes have become more popular over the past 12 months, as contractors look for a competitive edge in today's tough housing market.
“For us, it's just been a matter of more potential inventory out there that will qualify,” he said. Developers are required to invest considerable time and effort into the energy star rating, and it's in their best interest to sweeten the deal with a discounted mortgage referral.
And, programs that reduce power bills in the muggy South Atlantic state aren't a tough sell for consumers either.
“We do very little marketing or promotion, it's basically just word of mouth,” he said.
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