GJGNY Residential Loan Interest Rates for Sustainability - Green New York Advisory Council
This content provides detailed information on cost components, loan portfolio mix, cash flow implications, origination and servicing costs, loan defaults, and financing strategies for sustainable projects under the Green New York Advisory Council. It covers various aspects such as fixed costs, servicing costs, default rates, and financing options for different types of loans.
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GJGNY Residential Loan Interest Rates for Sustainability Green Jobs Green New York Advisory Council August 7, 2015
2 Agenda Cost Components Loan Portfolio Mix Cash Flow Implications for Sustainability Options
3 Cost Components Origination Servicing Loan defaults Financing costs
4 Origination Fixed costs by loan Fees paid to loan originator (Energy Finance Solutions - EFS) for loan underwriting (incl. credit report) and loan disbursement $175 for each Smart Energy loan issued $225 for each On-Bill Recovery loan issued
5 Servicing Costs Includes: Fees paid to loan servicer (Concord) for servicing loans Payment processing, billing and collections Generally average about $5/acct/month Utility fees for OBR loans - $100/loan and 1% of loan amt Title company fees for last owner search for OBR loans ($76 avg) Fees paid to title company and municipalities to file OBR Declaration and file satisfaction for OBR loans ($310 avg)
6 Loan Defaults Assume continuation of current loan defaults About .5% per year for Tier 1 loans (~7% cumulative for avg 14-yr term) About 1% per year for Tier 2 loans (~14% cumulative for avg 14-yr term)
7 Financing Tier 1 EE loans financed with support through EFC Clean Water State Revolving Fund 2013 Bonds issued at net interest cost of .5% with use of QECB subsidies 2015 Bonds issued at net interest cost of 2.4% - partially subsidized EFC advises that interest subsidies not likely available in the future. \ Assume future bond interest cost about 3.3% without subsidy Tier 1 PV loans not financeable through EFC NYSERDA exploring private placement financing anticipate rate of about 5% Tier 2 EE and PV loans not immediately financeable held until performance allows financing assume 4 yr hold period
8 Cost Summary $8,000 45.0%Cost as % of Average Loan Amount Cost Per Loan 40.0% $7,000 35.0% $6,000 30.0% $5,000 25.0% $4,000 20.0% $3,000 15.0% $2,000 10.0% $1,000 5.0% $0 0.0% EE-MR EE-LMI EE-Total PV-MR PV-LMI PV-Total EE-MR EE-LMI EE-Total PV-MR PV-LMI PV-Total Financing Financing $1,934 $1,108 $1,686 $4,298 $2,878 $4,116 16.1% 14.4% 15.7% 25.3% 16.5% 24.2% Defaults Defaults $954 $728 $886 $1,226 $2,554 $1,396 7.9% 9.4% 8.3% 7.2% 14.7% 8.2% Servicing Servicing $1,160 $1,142 $1,155 $1,251 $1,272 $1,253 9.6% 14.8% 10.8% 7.4% 7.3% 7.4% Origination Origination $208 $211 $209 $201 $200 $201 1.7% 2.7% 1.9% 1.2% 1.1% 1.2%
9 Loan Segmentation 12 Months Ended 6/30/15 Purpose Income Level Underwriting Loan Type EE Market Rate Count % of Total 566 1029 77 174 1846 151 376 69 196 792 2638 Avg Loan $13,399 $11,264 $11,590,545 $12,395 $11,969 $12,032 $22,211,594 $8,551 $7,287 $10,275 $6,998 $7,717 $10,737 $28,323,420 Total % of Tot $7,583,995 Tier 1 On-Bill Recovery Smart Energy On-Bill Recovery Smart Energy 21% 39% 3% 7% 70% 6% 14% 3% 7% 30% 100% 27% 41% 3% 7% 78% 5% 10% 3% 5% 22% 100% Tier 2 $954,443 $2,082,611 Subtotal LMI Tier 1 On-Bill Recovery Smart Energy On-Bill Recovery Smart Energy $1,291,164 $2,740,073 $708,948 $1,371,641 $6,111,826 Tier 2 Subtotal EE Total PV not available Tier 1 On-Bill Recovery Smart Energy 481 514 995 73 73 146 1141 42% 45% 87% 6% 6% 13% 100% $17,075 $16,887 $16,978 $16,893,070 $17,400 $1,270,210 $17,426 $1,272,122 $17,413 $2,542,332 $17,034 $19,435,402 $8,212,933 $8,680,137 42% 45% 87% 7% 7% 13% 100% Monthly PV loan issuances have increased over last year. Current annual future forecast of $43M used for analysis. Tier 2 On-Bill Recovery Smart Energy PV Total Grand Total 3779 $12,638 $47,758,822
10 Cash Flow Holding Period Loans initially funded through GJGNY Revolving Loan Fund aggregated until they are financed Assume Tier 1 EE and PV loans held for avg of 12 months before financing Assume Tier 2 loans held for avg of 4yrs before financing P&I repaid during holding period reduces amount financed and offsets costs Overcollateralization Depending upon interest rates, in order to meet debt service requirements, pledge loans may be > proceeds from financing, so RLF not fully replenished Requires cash, but recovered over term of financing (e.g. 15 yrs) Assume coverage ratio of 125%
11 Cash Flow Effects Holding period Energy Efficiency LMI PV Total MR Total MR/Tier1 LMI/Tier2 Total Revolving fund needed for holding period: - Loan issuance * -Tier 2 (+3yr hold period) Total $22.2 $8.4 $30.6 $6.1 $5.7 $11.8 $28.3 $14.1 $42.4 $37.4 $5.6 $16.8 $22.4 $43.0 $16.8 $59.8 $71.3 $30.9 $102.2 0 $37.4 Overcollateralization Energy Efficiency LMI $22.2 $4.6 PV Total MR Total MR/Tier1 LMI/Tier2 $37.4 $10.2 Total Loan$ Issued Per Year * Cash deficit at Financing (overcollateralization) based on current rates $6.1 $1.4 $28.3 $6.0 $5.6 $.7 $43.0 $10.9 $71.3 $16.9 * Based on 12 months ended Jun 2015 for EE; projected future annual loan issuance for PV.
12 Interest Rate Strategies By consumer segment (MR vs LMI) and by purpose (EE vs PV) Portfolio rate recovery with continuation of subsidized rate for LMI Tiered pricing by term Pricing by utility territory (takes into consideration project economics and differences in utility rates)
13 Hypothetical Loan Rate to Address Costs ($ in millions) Energy Efficiency LMI $22.2 $1.9 PV MR Total MR/Tier1 LMI/Tier2 Total Loan$ Issued Per Year * Cost deficit (over loan term) based on current Interest Rate Interest rate required to eliminate cost deficit Cash deficit (overcollateralization)that still results if above rates were used Interest rate to eliminate cost deficit, but maintain current LMI rate Cash deficit (overcollateralization)that still results if above rates were used $6.1 $.9 $28.3 $2.8 $37.4 $5.0 $5.6 $.7 $43.0 $5.7 4.75% 5.50% 4.90% 5.45% 5.00% 5.40% $3.0 $.7 $3.7 $6.3 $.2 $6.5 5.30%** 3.49% 4.90% 5.70%** 3.49% 5.40% $2.3 $1.4 $3.7 $5.8 $.7 $6.5 * 12 months ended Jun 2015 for EE; projected future annual loan issuance for PV. ** Assumes MR loans would stay at current levels of loan issuance to make up for LMI shortfall. If MR loan issuances decreased, would require a higher rate.
14 Hypothetical Loan Rate to Address Overcollateralization Energy Efficiency LMI PV Total MR Total MR/Tier1 LMI/Tier2 Total Loan$ Issued Per Year * Cash deficit at Financing (overcollateralization) based on current rates Interest rate required to eliminate cash overcollateralization $22.2 $4.6 $6.1 $1.4 $28.3 $6.0 $37.4 $10.2 $5.6 $.7 $43.0 $10.9 $71.3 $16.9 7.00% 7.25% 7.10% 8.40% 5.60% 8.00% Interest rate required to eliminate cash overcollateralization, but maintain current rate for LMI 7.95%** 3.49% 7.10% 8.70%** 3.49% 8.00% * 12 months ended Jun 2015 for EE; projected future annual loan issuance for PV. ** Assumes MR loans would stay at current levels of loan issuance to make up for LMI shortfall. If MR loan issuances decreased, would require a higher rate.
15 Summary Capital Magnitude $800 Year 1 2 3 4 5 6 7 8 9 10 Loans $ 70 $ 140 $ 210 $ 280 $ 350 $ 420 $ 490 $ 560 $ 630 $ 700 Costs $ 9 $ 17 $ 26 $ 34 $ 43 $ 51 $ 60 $ 68 $ 77 $ 85 O/C $ 17 $ 34 $ 51 $ 68 $ 85 $ 101 $ 118 $ 135 $ 152 $ 169 $700 $600 $500 $400 $300 $200 $100 $- 1 2 Sum of Loans 3 4 5 6 7 8 9 10 Sum of Costs Sum of O/C
16 Strategic Business Options EE PV Total MR LMI MR/Tier1 LMI/Tier2 Option 1 Business as Usual Current Rates Cost deficit resulting from each year's loan issuances Overcollateralization cash shortfall from each year's loan issuances 3.49%-3.99% $1.9mm 3.49%-3.99% $5.0mm $.9MM $.7mm $8.5mm $4.6mm $1.4mm $10.2mm $.7mm $16.9mm Option 2 Origination Cost Recovery Hypothetical Rates Cost deficit resulting from each year's loan issuances Overcollateralization cash shortfall from each year's loan issuances 4.75-5.3% $0 3.49-5.5% $0 5.45-5.70% $0 3.49-5% $0 $2.3-3.0mm $.7-1.4mm $5.8-6.3mm $.2-.7mm $10.2mm Option 3 Origination Cost Recovery and Overcollateralization Reserves Hypothetical Rates Cost deficit resulting from each year's loan issuances Overcollateralization cash shortfall from each year's loan issuances 7-7.95% $0 3.49-7.25% $0 8.4-8.7% 3.49-5.60% $0 $0 $0 $0 $0 $0 $0
17 Impact of Hypothetical Rate Change on EE Project Savings Avg 1st Yr Net Savings @4.0% Avg 1st Yr Net Savings @4.5% Avg 1st Yr Net Savings @5.0% Avg 1st Yr Net Savings @5.5% Avg 1st Yr Net Savings @6.0% Avg 1st Yr Net Savings @6.5% Avg 1st Yr Net Savings @7.0% Avg 1st Yr Net Savings @7.5% Avg 1st Yr Energy Savings Avg 1st Yr Net Savings Avg Annual Loan Pmt Segment #Loans Total Loans Tier 1 LMI/ Assisted Market 1779 5373 7152 $13,240,144 $58,718,785 $71,958,930 $1,010 $1,179 $1,137 $725 $1,074 $988 $284 $105 $149 $263 $71 $118 $241 $38 $88 $218 $4 $58 $195 ($29) $26 $172 ($64) ($5) $148 ($99) ($38) $123 ($135) ($71) $99 ($171) ($104) Tier 2 LMI/ Assisted Market 587 471 1058 8210 $4,598,742 $5,590,615 $10,189,357 $82,148,287 $1,059 $1,306 $1,169 $1,141 $728 $1,102 $895 $976 $331 $204 $275 $165 $309 $168 $246 $135 $285 $132 $217 $105 $261 $96 $188 $74 $237 $59 $158 $43 $212 $21 $127 $12 $186 ($17) $96 ($21) $161 ($57) $64 ($53) $134 ($96) $32 ($86) Total
18 Impact of Hypothetical Rate Change on EE Savings Utility Territory Avg 1st Yr Energy Savings Avg 1st Yr Net Savings @4.0% $827 $880 $877 $680 $714 $826 $646 $1,118 $1,322 $1,124 $1,005 $1,126 $1,042 $931 $911 $1,109 $817 $681 $718 $705 $648 $1,231 $1,195 $1,189 $983 $1,160 $1,299 $1,001 Avg 1st Yr Net Savings @4.5% $412 $455 $758 $180 $189 $266 ($4) $190 $245 $436 ($79) $17 $102 ($218) $556 $500 $809 $178 $262 $200 $41 $283 $485 $517 $0 $66 $54 ($201) Avg 1st Yr Net Savings @5.0% $385 $427 $730 $159 $167 $240 ($24) $154 $204 $399 ($108) ($17) $69 ($245) $527 $465 $781 $157 $238 $177 $20 $241 $446 $477 ($31) $28 $16 ($234) Avg 1st Yr Net Savings @5.5% $358 $398 $702 $138 $145 $214 ($45) $117 $163 $361 ($138) ($52) $35 ($273) $496 $430 $753 $135 $213 $154 ($1) $199 $407 $436 ($62) ($10) ($23) ($267) Avg 1st Yr Net Savings @6.0% $331 $369 $673 $117 $122 $188 ($66) $80 $121 $322 ($168) ($87) ($0) ($302) $465 $395 $724 $113 $188 $130 ($23) $155 $366 $395 ($94) ($49) ($63) ($300) Avg 1st Yr Net Savings @6.5% $303 $339 $644 $95 $100 $161 ($87) $42 $78 $283 ($199) ($123) ($35) ($331) $433 $359 $694 $90 $163 $106 ($45) $111 $325 $353 ($127) ($89) ($103) ($335) Avg 1st Yr Net Savings @7.0% $274 $309 $614 $73 $76 $134 ($109) $4 $34 $243 ($230) ($160) ($71) ($360) $401 $322 $664 $67 $137 $81 ($67) $66 $284 $310 ($160) ($130) ($145) ($369) Utility Territory CHGE ConEd LIPA NatGrid NYS EG O&R RG&E CHGE ConEd LIPA NatGrid NYSEG O&R RG&E CHGE ConEd LIPA NatGrid NYSEG O&R RG&E CHGE ConEd LIPA NatGrid NYSEG O&R RG&E Avg Annual Loan Pmt Avg 1st Yr Net Savings $438 $484 $786 $197 $211 $296 $12 $230 $290 $477 ($51) $53 $141 ($193) $588 $540 $839 $195 $286 $229 $59 $332 $523 $560 $29 $103 $95 ($174) #Loans Total Loans 63 65 $553,956 $606,945 $2,323,825 $6,107,294 $1,942,505 $322,979 $1,285,808 $3,073,036 $6,100,080 $13,080,784 $20,696,002 $9,210,275 $1,480,301 $4,570,883 $257,543 $228,237 $921,537 $1,813,423 $607,223 $121,160 $609,785 $358,726 $308,720 $1,715,306 $1,564,751 $765,746 $217,874 $590,149 $1,265 $1,364 $1,662 $878 $925 $1,123 $658 $1,348 $1,612 $1,601 $954 $1,179 $1,183 $738 $1,499 $1,649 $1,656 $876 $1,004 $934 $707 $1,563 $1,718 $1,749 $1,012 $1,263 $1,393 $827 $245 $278 $584 $51 $53 $106 ($131) ($35) ($10) $202 ($261) ($197) ($108) ($390) $369 $285 $634 $44 $110 $56 ($90) $20 $241 $266 ($194) ($171) ($186) ($405) Tier 1 LMI 252 888 268 38 192 258 450 1059 2124 811 133 498 Tier 1 MR 26 20 Tier 2 LMI 100 255 76 16 88 26 24 130 152 61 17 55 Tier 2 MR
19 Impact of Hypothetical Rate Change on EE Savings By Income Level Avg 1st Yr Net Savings @4.0% Avg 1st Yr Net Savings @7.5% Borrower/ Coborrower Income as % of AMI EE Tier 1 0-60% 61-80% 81-100% 101-120% 121%+ Tier 2 0-60% 61-80% 81-100% 101-120% 121%+ Total Avg 1st Yr Energy Savings $1,141 $1,137 $1,072 Avg 1st Yr Net Savings Avg 1st Yr Net Savings @4.5% $135 $119 $211 $137 $114 $88 $100 $246 $404 $167 $211 $87 $244 $135 Avg 1st Yr Net Savings @5.0% $105 $88 $186 $113 $88 $61 $67 $217 $379 $144 $182 $60 $207 $105 Avg 1st Yr Net Savings @5.5% $74 $58 $159 $88 $61 $33 $33 $188 $355 $120 $153 $31 $170 $74 Avg 1st Yr Net Savings @6.0% $43 $26 $133 $63 $34 $4 ($2) $158 $330 $95 $124 $3 $132 $43 Avg 1st Yr Net Savings @6.5% $12 ($5) $106 $37 $6 ($24) ($37) $127 $304 $70 $94 ($27) $94 $12 Avg 1st Yr Net Savings @7.0% Avg Annual Loan Pmt #LoansTotal Loans 8210 7152 951 619 797 769 4016 1058 259 166 182 128 323 8210 $82,148,287 $71,958,930 $8,149,919 $5,029,512 $7,049,998 $7,004,628 $44,724,872 $10,189,357 $2,089,479 $1,298,781 $1,717,711 $1,174,142 $3,909,245 $82,148,287 $976 $988 $834 $797 $899 $890 $1,090 $895 $757 $738 $870 $846 $1,118 $976 $165 $149 $238 $160 $140 $116 $135 $275 $427 $188 $238 $112 $281 $165 ($21) ($38) $78 $11 ($23) ($54) ($73) $96 $278 $45 $63 ($56) $54 ($21) ($53) ($71) $50 ($16) ($51) ($83) ($109) $64 $251 $19 $32 ($87) $15 ($53) ($86) ($104) $22 ($43) ($81) ($114) ($146) $32 $224 ($7) $958 $1,039 $1,006 $1,225 $1,169 $1,185 $927 $1,108 $958 $1,399 $1,141 $0 ($117) ($26) ($86)
20 Impact of Hypothetical Rate Change on PV Loan Payment Current Avg Monthly Payment Avg Mo Pmt @ 4% Avg Mo Pmt @ 4.5% Avg Mo Pmt @ 5.0% Avg Mo Pmt @ 5.5% Avg Mo Pmt @ 6.0% Avg Mo Pmt @ 6.5% Avg Mo Pmt @7.0% Avg Mo Pmt @ 7.5% Segment #LoansTotal Loans Total Loans PV 1147 $19,539,905 $19,539,905 $128 $133 $137 $141 $146 $150 $155 $160 $164 Tier 1 1001 $16,997,573 $16,997,573 $128 $132 $137 $141 $146 $150 $155 $159 $164 Tier 2 146 $2,542,332 $2,542,332 $129 $134 $138 $143 $147 $152 $157 $161 $166 Total 1147 $19,539,905 $19,539,905 $128 $133 $137 $141 $146 $150 $155 $160 $164
21 Considerations Market players standing ready for Market Rate financing These organizations have greater capital resources than GJGNY Fund Existence of subsidized GJGNY financing is currently delaying market entry Market providers not as well poised to serve LMI consumer market
22 Market-based Financing Products - EE GreenSky Credit Admirals Bank, No Dealer Fee Admirals Bank, Deferred Loan, No Dealer Fee $45,000 700 45% 7 yrs: 6.49% 10 yrs: 7.49% 12 yrs: 8.49% Max Loan FICO, Min Debt:Income, Max Term/Interest Rate $45,000 700 45% 7 yrs: 5.99% 10 yrs: 6.99% 12 yrs: 7.99% $55,000 Mid-600s Avgs 40% Up to 12 years Interest Rate Secured/Unsecured Developer Fee 3.99%, 5.99%, 7.99% Unsecured No Unsecured No. Homeowner pays a 5% loan origination fee + a 1% annual maintenance fee, paid monthly (funds Admirals loan loss reserve) For the homeowner to incur no origination fee, the Contractor can pay a developer fee on a graduating scale. Notes: Contractors have the option to buy down the interest rate to 3.99%
23 Market-based Financing Products - PV Sungage Financial Financial Energy Unsecured Loan GreenSky Credit Dividend Solar Kilowatt Hudson Clean Admirals Bank, Admirals Bank, Secured Loan (FHA Backed) $40,000 650 45% Max Loan FICO, Min Debt:Income, Max $50,000 680 50% $60,000 660 NA $70,000 680 TBD for NYS. Needed with FICO is below 700 20 yrs $45,000 700 45% $55,000 640 Avg 40%, but depends on credit score $50,000 680 55% Terms 15 and 20 yrs Up to 12 yrs 20 years 5, 10, 15, 20 yrs 4.5-7.25% 5, 7, 10, 15 and 20 yrs 4.99-9.99% 5, 7, 10, 15 and 20 yrs 4.99-9.99% Interest Rates 4.99-9.99% 20 yrs: 5.99- 10.99% Unsecured; UCC-1 12 mos 5.99% (APR) 0%-9.99% 6.5% (Un)Secured UCC-1 filing UCC-1 filing Ucc-1 filing Secured with a 2nd mtg 30% (tax credit portion) only Unsecured; UCC-1 filing 12, 15 and 18 mos, interest free Unsecured; UCC-1 filing 12-18 months 0%, 12 months Deferred Payment Option? Up to 16 mos (4 mos construction + 12 mos), interest free 6% Fee = 9.99% 7% Fee = 8.99% 8% Fee = 7.99% 9% Fee = 6.99% 18 months, 0% interest. Balance re- amortized over (up to) 12 years Yes. Amount depends on which of the 24 programs is selected. No Yes 5% developer fee Developer Buy-Down? No buy-down permitted. Develo per fee built into the loan; no out-of- pocket cost to the borrower Developer Fee 5-7% Yes; competitive Available for PV and HP projects
