New York GJGNY/On-Bill Recovery Financing Webinar 10/2/2012 Jeff Pitkin, Treasurer New York State Energy Research and Development Authority
Background Green Jobs-Green New York Act of 2009 (Oct 2009) Established revolving loan fund and innovative financing mechanisms to provide loans to finance energy efficiency improvements for: Residential 1-4 family dwellings (up to $25,000) Multifamily buildings (program limit $5,000/unit or $500,000 per building) Small business (<101 employees) and not-for-profit structures (up to $50,000) Power NY Act of 2011 (Aug 2011) Established statewide on-bill recovery financing program Funding $112 million RGGI proceeds, including revolving loan fund comprised of: Residential Multifamily Small Commercial/NFP $26.7 million $11.3 million $13.3 million $51.3 million U.S. Dept of Energy Better Buildings Grant ($40 million) $9.3 million approved for loan loss/debt service reserve
OBR Key Features On-bill recovery charge provides consumer safeguards for deferred payment arrangements, notices for termination of service; termination of service; late payment charges Termination of service is a consumer safeguard not a threat Statewide program with 3 rd party funding Total bill neutrality Installment charge cannot exceed 1/12 th of projected total energy savings Covers electric, gas, and heating fuel measures Charge placed on electric bill, unless the majority of savings result from gas measures Transferrable obligation
OBR Loan Transferability Unless satisfied prior to sale, on-bill recovery charge survives changes in ownership Arrears at time of transfer are responsibility of incurring customer, unless expressly assumed by purchaser Seller required to provide notice to purchaser Does not preclude purchaser from requiring satisfaction of outstanding obligation by seller prior to sale Recorded through a Program Declaration Agreement Filed in county/city recording office like a property easement Does not establish a lien on the property Ensures notice to purchaser through title search process
OBR: Addressing Utility Concerns Fees for billing system modifications and administration $900,000 [from US DOE Better Buildings grant] allocated on a pro-rata basis for costs associated with changes to billing systems $100 per loan paid at closing 1% of loan amount paid at closing Partial payment of utility bill first applied to utility charges, then on-bill recovery charge
OBR: Commission Oversight PSC approved tariff filings for each participating utility Participation initially limited to.5% of each utility s customers NYSERDA can petition to increase limit provided PSC finds that program has not harmed the company or its ratepayers PSC can suspend any utility s offering after conducting hearing and finding that there has been significant increase in arrears or disconnections directly related to on-bill recovery Quarterly program reports filed
Residential Loan Terms Loan Type Unsecured Loan (Launched 11/15/2010) On-Bill Recovery Loan (Launched 1/30/2012) Borrower eligibility Owner or lessee Owner and must be named on the utility account of one of the 7 participating utilities Loan Amt Up to $13,000; $25,000 if payback period is 15 years or less Loan Term 5, 10, or 15 years; term may not exceed expected useful life of measures Interest Rate 3.99%; 3.49% if repaid through 2.99% automatic ACH payment Repayment Terms Cost Effectiveness Required Repaid through monthly statement billing or ACH payment. Borrower responsible for satisfaction upon sale or transfer of property At least 85% of total cost is prequalified measures or anticipate energy savings over life of measures are at least 80% of total principal and interest to be repaid on loan. Repaid through charge on utility bill Declaration signed by borrower and filed like mortgage (not a lien or mortgage provides notice to subsequent purchaser through title search) Remaining obligation may be assumed by purchaser upon sale of property. Nonpayment subjects the borrower to termination of utility service. Loan installment charge may not exceed 1/12 th or estimated annual energy savings
Loan Origination Launched using single originator, Wisconsin Energy Conservation Corp d/b/a Energy Finance Solutions (EFS) - FNMA loan originator Open up to multiple lenders in 2012 Loans originated using NYSERDA loan underwriting standards Lender closes on loan, funded by NYSERDA using revolving loan fund Lender paid $175 origination fee (OBR Fee of $225); Lender can charge additional fee (financeable) to borrower if needed to cover costs (EFS currently charges $150)
Loan Servicing Separated loan servicing from loan origination Loans serviced by NYSERDA master loan servicer, Concord Servicing Corporation A premier third-party loan servicer since 1998 Over 650,000 accounts managed Monitors origination (15% sample) to ensure conformance with standards Performs billing and collection services for unsecured loans Responsible for data exchange with utilities for On-Bill Recovery Loans and receipt of monthly remittances from utilities
Loan Underwriting Approach Tier1 loans - Traditional FNMA standards - Aggregated and financed through capital markets Tier2 loans - Originated using alternate loan underwriting criteria - Loans held in revolving loan fund - Monitor loan performance 2-3 yrs, then added to pool of loans financed through capital markets with good performance No difference in interest rate or other terms between loan tiers
Residential Loan Underwriting Standards Standard Tier 1 Loans Tier 2 Loans Minimum FICO or alternate Debt-to- Income ratio 640 (680 self-employed 2yrs+) (720 self-employed <2yrs) Current on all energy bills for at least 2 consecutive billing periods during each of the last 2 years Current on any and all mortgage payments for the last year No payments more than 60 days late for last 2 yrs Up to 50% Up to 55% Up to 70% if FICO score of 680+ Waived for applicants who qualify for Assisted Home Performance with ENERGY STAR subsidy (50% of work, up to $5,000) - household income < 80% State/area median income Bankruptcy No bankruptcy, foreclosure, or repossession within last 7 yrs No bankruptcy, foreclosure, or repossession within last 5 yrs Judgments No combined outstanding collections, judgments or tax liens > $2,500
Residential Loan Portfolio Status 8/31/2012 Applications Status Status Unsecured On-Bill Recovery Total Approved 2,638 66% 847 67% 3,485 66% Denied 1,055 26% 342 27% 1,397 26% Didn t pursue Tier2 318 8% 72 6% 390 7% Total 4,011 100% 1,261 100% 5,272 100% Pending 11 9 20 Withdrawn prior to approval 335 126 461 Total Applications Received 4,357 1,396 5,753
Residential Loan Portfolio Status 8/31/2012 Application Denials Reason for Denial Unsecured On-Bill Recovery Total Debt Ratio 551 40% 146 35% 697 39% Credit Score 349 25% 169 41% 518 29% Bankruptcy, foreclosure, repossession Collections, judgments, chargeoffs 227 17% 56 14% 283 16% 214 16% 40 10% 254 14% Other 32 2% 3 1% 35 2% Total 1,373 100% 414 100% 1,787 100%
GJGNY Residential Loan History Green Jobs-Green New York Financing Loans Issued by Type # Unsecured Loans Closed / Month # OBR Loans Closed / Month Total Unsecured Loans Closed Total OBR Loans Closed 160 2000 140 120 100 80 60 40 20 0 55 32 96 41 Jan '11 Feb '11 55 151 Mar '11 76 227 65 292 Apr '11 May '11 77 369 Jun '11 Jul '11 73 74 442 516 Aug '11 588 72 684 96 Sep '11 Oct '11 802 118 Nov '11 1194 1062 922 120 140 132 Dec '11 Jan '12 Feb '12 1 1320 1420 10 126 100 35 1528 108 1 11 46 Mar Apr '12 May '12 '12 1676 1612 40 43 84 64 86 129 Jun '12 Jul '12 1751 60 75 189 Aug '12 1800 1600 1400 1200 1000 800 600 400 200 0
GJGNY Residential Loan History Green Jobs-Green New York Financing Loans Issued by Tier # Tier 1 Loans Closed / Month # Tier 2 Loans Closed / Month Total Tier 1 Loans Closed Total Tier 2 Loans Closed 160 140 120 100 80 60 40 20 0 12 12 13 13 15 12 1330 1232 6 1120 1001 2 4 0 4 1 874 6 766 127 119 124 0 1 71 108 112 109 116 73 70 660 106 98 97 73 570 55 54 74 90 0 59 356 429 499 32 150 283 224 41 96 0 0 1 3 9 13 13 17 18 24 36 48 61 74 89 101 120 135 145 164 Jun '11 Jul '11 Jun '12 Jul '12 Jan '11 Feb '11 Mar '11 Apr '11 May '11 Aug '11 Sep '11Oct '11 Nov '11 Dec '11 Jan '12 Feb '12 Mar '12 19 1454 Apr '12 May '12 1563 15 1660 10 1776 19 Aug '12 2000 1800 1600 1400 1200 1000 800 600 400 200 0
Residential Loan Portfolio Status 8/31/2012 Approved Loans Status Unsecured On-Bill Recovery Total Closed Loans 1,751 $16,037,495 189 $1,944,630 1,940 $17,982,125 Approved Pending Completion 162 $1,392,597 152 $1,645,926 314 $3,038,522 Subtotal 1,913 $17,430,091 341 $3,590,556 2,254 $21,020,647 Preapproved 267 455 722 Withdrawn 458 51 509 Total 2,638 847 3,485
Residential Loan Portfolio Status 8/31/2012 Loan Statistics Unsecured Loans On-Bill Recovery Loans Tier 1 Tier 2 Tier 1 Tier 2 Loans Issued 1,596 152 167 16 1,931 Loans Issued $14,746,623 $1,453,890 $1,745,061 $167,132 $18,112,707 % of Total 81.4% 8.0% 9.6% 1.0% 100% Avg FICO score 747 712 747 712 744 Avg DTI 33% 88% 32% 74% 37% Avg Original Term (mos) 138.4 154.7 172.0 172.5 143 Avg Term Remaining 126.2 146.7 172.0 172.5 132 Avg Interest Rate 3.59% 3.60% 2.99% 2.99% 3.53% Average Loan $9,240 $9,565 $10,449 $10,446 $9,380 P&I Repaid $1,465,091 $99,056 $1,729 $0 $1,565,877 Current Balance $13,631,951 $1,380,129 $1,743,409 $167,132 $16,922,621 # Loans Outstanding 1,565 150 167 16 1,898 Total
Residential Loan Portfolio Status 8/31/2012 Loan Performance Unsecured Loans On-Bill Recovery Loans Status Tier 1 Tier 2 Tier 1 Tier 2 # % of $ # % of $ # % of $ # % of $ Current 1,557 99.61% 148 99.36% 167 100.00% * 31-60 days past due 61-90 days past due 16 100.00% * 5 0.29% 0 0% 0 0% 0 0% 1 0.05% 1 0.26% 0 0% 0 0% 90+ days 2 0.5% 1 0.38% 0 0% 0 0.00% Total 1,565 100.00% 150 100.00% 167 100.00% 16 100.00% Note: OBR Loans were implemented with no payments due from customers until billing periods starting in June 2012. There is also lag between utility collection from customer and utility monthly remittance to NYSERDA going forward, OBR loan status will be measured based on date payments due from utility.
On-Bill Recovery Loans by Utility Preapproved Approved Issued Utility Initial Cap (.5%) # Loans Loan Amt # Loans Loan Amt # Loans Loan Amt Total # In Process % of Cap Total $ Central Hudson 1,524 44 $404,800 10 $146,819 8 $87,951 62 4.1% $639,570 Con Edison 17,066 29 $266,800 21 $298,160 21 $238,173 71 0.4% $803,133 LIPA 5,591 85 $782,000 42 $474,343 41 $475,404 168 3.0% $1,731,747 National Grid upstate 8,419 164 $1,508,800 44 $404,205 62 $562,047 270 3.2% $2,475,053 NYSEG 4,675 101 $929,200 24 $228,958 39 $403,069 164 3.5% $1,561,227 Orange & Rockland 1,123 18 $165,600 8 $81,905 11 $130,840 37 3.3% $378,344 RG&E 2,026 14 $128,800 3 $11,536 7 $47,146 24 1.2% $187,482 Total 40,423 455 $4,186,000 152 $1,645,926 189 $1,944,630 796 2.0% $7,776,556
Capital Markets Financing Approach Aggregate loans and issue bonds using master trust structure Bonds supported by loan repayments and loan loss/debt service reserve ($9.3M from DOE EECBG Better Buildings grant) Proceeds used to fund additional program loans First issuance $25M - rated public issuance Subsequent issuances will increase scale Anticipate A rating; ~5.7% (300-400 bps over Treasury); ~10-12yr term On-Bill structure MAY qualify for AAA or AA rating Issue as Qualified Energy Conservation Bonds (QECBs) QECB bonds provide 70% interest subsidy, resulting in lower loan rate Once QECB bond volume cap exhausted, loan rates will be increased due to loss of subsidy
Questions Jeff Pitkin (518)862-1090 x3223 jjp@nyserda.org