Unique Secondary Market Sale Provides Craft3 More Liquidity for Energy-Efficiency Loans
Craft3 and Self-Help today announced that Self-Help Credit Union has purchased an additional $6.4 million On-Bill Repayment (OBR) single-family, energy-efficiency improvement loans. The new deal reflects the strong performance of a $15.7 million OBR portfolio transaction between the two community development financial institutions (CDFIs) in 2013.
“This second sale is more strong evidence that OBR loans perform extremely well while providing homeowners affordable, inclusive, energy-efficiency financing,” said Craft3 President John Berdes. “Our hope is to prove OBR loans as a model for expanding access to energy-efficiency and for these secondary market sales to increase liquidity for these loans.”
Self-Help has a well-established secondary market home mortgage program and applied its experience to OBR loans. In 2013 the organizations completed the first ever secondary market transaction in the relatively untested OBR market. The purchase proceeds provided Craft3 additional capital to help meet increasing OBR loan demand.
The 2013 OBR portfolio’s performance, including a historic total loan loss of less than one percent and high repayment rates, enabled Self-Help to purchase more OBR loans, providing more capital to Craft3 to put even more money to work making loans. It also allowed Self-Help to expand its loan purchase criteria to include all credit scores.
“After all the work on the first purchase balancing Craft3’s OBR innovations while creating a viable secondary market transaction for such products, this second deal is all the more gratifying,” said Self-Help’s Director of Commercial Lending Brian Schneiderman. “The affordability of energy-efficiency improvements like high-efficiency furnaces has been a real barrier for many families. Helping prove OBR programs can expand energy efficiency to families of modest means is a huge leap forward.”
Since 2009, Craft3 has partnered with Enhabit (formerly Clean Energy Works) to provide consumer energy-efficiency loans to Oregonians. Craft3’s innovative OBR allows homeowners to make loan payments through their monthly utility bill. This expands access to credit for energy-efficiency improvements by eliminating the up-front, out-of-pocket costs that often make upgrades unaffordable. OBR also allows Craft3 to review a homeowner’s utility bill payment history as a factor in loan qualification. Using a blend of traditional and non-traditional underwriting techniques, Craft3 has approved loans to over 87 percent of homeowners who apply.
Concurrently, the program helps build a network of contractors with increased green expertise and creates local jobs in this sector. To date, Craft3 and Enhabit’s partnership has helped 2,659 Oregon homeowners finance $35.7 million in energy-efficiency upgrades. These homeowners avert more than 6,800 metric tons of greenhouse gasses annually. Overall the program has catalyzed more than $40.9 million of local economic activity, reduced carbon emissions, created jobs for local contractors and reduced home energy use.
With demand for the program increasing, Craft3 needed additional capital for loans, and found a partner in Self-Help. The 2013 sale of Craft3’s Home Energy-Efficiency Loan portfolio Self-Help Credit Union represented a new model for attracting capital to energy-efficiency loans supporting upgrades such as installation of high-efficiency furnaces, water heaters and insulation.
A 2014 Lawrence Berkeley National Laboratory (LBNL) policy brief provided an in-depth look at the first portfolio sale. The policy brief examined how the parties addressed challenges in the uncharted territory of valuing OBR loans, selling such a unique portfolio to a federally regulated depository institution, and how the partnership might inform similar investments. The LBNL Policy Brief, as well as extensive details on the loan program and the portfolio sale, can be found at: http://www.craft3.org/Borrow/portfolio-sale.
As a community development lender, Self-Help has long recognized the importance of environmental sustainability in all communities. Cumulatively, Self-Help has made $249 million in direct loans to sustainable businesses, nonprofits, and community facilities. Loans span a range of uses including energy efficient buildings ($137 million), utility-scale solar farms ($76 million), recycling businesses ($15 million) and healthy foods systems ($14.5 million).
Home Energy-Efficiency Loans in Oregon and SW Washington are in collaboration with Enhabit and Energy Trust of Oregon and on-bill repayment through NW, Portland General Electric and Pacific Power. Craft3’s efforts to find a secondary market partner were supported by Bank of America, Bullitt Foundation and Laird Norton Foundation. Self-Help also has received support from Bank of America for its energy-efficiency lending.
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Craft3 is a nonprofit community development financial institution with a mission to strengthen economic, ecological and family resilience in Pacific Northwest communities. They do this by providing loans to entrepreneurs, nonprofits, individuals and homeowners, including those without access to financing. Craft3 then complement these financial resources with expertise, personal connections and other advocacy for their clients. Learn more at www.Craft3.org.
Self-Help is a community development lender headquartered in Durham, NC. Founded in 1980, Self-Help has provided over $6.8 billion in financing to 102,000 families, individuals and businesses underserved by traditional financial institutions. It helps drive economic development and strengthen communities by financing hundreds of homebuyers each year, as well as nonprofits, child care centers, community health facilities, public charter schools, and residential and commercial real estate projects. Through its credit union network, Self-Help serves 130,000 families in North Carolina, California and Chicago and offers a full range of financial products and services. Learn more at www.self-help.org.