Developing Local Energy Efficiency

Lending Programs

Presented to the EARN Conference 2011

Localizing Finance Panel

Milwaukee, Wisconsin

September 14, 2011

Keith Welks

Deputy Treasurer

Pennsylvania Treasury Department

Public/Private Partnership Leveraging Public $$ and Private Delivery

• Keystone HELP I 2006 - 2008• Unsecured loans to $10K for ES improvements• Fixed interest rate for maximum 10-year term

(2006: 7.99%; 2007-08: 8.99%)• Consumer oriented, contractor-centric program design• Housing Finance Agency introduces complementary

program for secured loans to $35,000

• Keystone HELP II 2009 - 2010• Unsecured loans to $15K for ES improvements

(6.99% for maximum 10-year term) • Unsecured loans to $15K for advanced ES improvements

(5.99% for maximum 10-year term)• Unsecured loans to $15K for improvements recommended

by whole-house audit (4.99% for 10-year term)

• Housing Finance Agency enhances complementary program for secured loans to $35,000

Production To Date (through August 2011)

• Loans made: 8509 (with secured: 9300) • Dollars lent: $57.2M (with secured: $74.2M)• Loss Reserve: approximately 8% of unpaid

balance)• Original Average term approximately 7 years, with

actual expected loan life closer to 5 years • Loan charge-offs to date of 1.48%, with late

accounts totaling less than 1%

Key to Success: Harmonizing Interests

Effective loan programs integrate, and maximize consonance between, critical participants

• Borrower (necessary)• Simple – fast – cheap (if lucky: cost-effective)

• Lender (Originator/underwriter/servicer) (necessary)• Easy to market to consumers – ability to control underwriting

decisions – take out strategy

• Contractor (highly desirable) • Easy to learn, easy to explain – competitive advantage – minimal

additional paperwork, obligations

• Program Sponsor (Supporting funds) (very likely)• Acceptable leveraging – relevant and effective projects – robust

data/metrics

• Capital Supplier (Aggregator) (very likely)• Alignment of economic interests – security – return – take out

strategy