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For VSECU, these loans are great credit and a fast-growing market.
This is bonus coverage from “Shrinking Targets” in the January 2018 issue of CUES’ Credit Union Management magazine.
When Vermonters gasp at a high electric bill and decides it’s time to go solar, they call a contractor like Waterbury-based SunCommon to get a proposal and estimate. To pay for the installation, the SunCommon rep hands the buyer off to $725 million VSECU, Montpelier, Vt. As a result, the CU probably gets a new loan—typically anywhere from $15,000 to $50,000, explains James Moore, co-president of SunCommon.
VSECU has developed a green niche that has added $40 million to its $600 million loan portfolio. Most of the 2,000 green loan holders joined the CU as new members, notes CUES member Chuck Karparis, SVP/lending. The VGreen program should hold up well in the likely 2018 environment because it’s durable, he suggests.
The program is an outgrowth of a 2005 environmental mission statement adopted by VSECU’s board of directors.
“Around that time, we offered discounted loans through an interest rate buy-down program with Efficiency Vermont,” recalls Karparis. “We also partnered with a solar program through a local non-profit, VPIRG, to buy-down interest rates on solar water heating systems. That brought us a lot of business quickly, but then vendors from all parts of the efficiency and renewable markets were coming to us wanting to develop their own loan programs, so we decided to create a suite of loan products the borrower can choose from and any vendor could offer.”
At first, the borrower completed paper loan and membership applications, but now the process can be completed online, right at the borrower’s kitchen table, with or without a vendor rep to guide them. It’s a little like buying and financing a car, but SunCommon and between 100 and 150 other VGreen vendors work primarily or exclusively with VSECU.
“With an Internet connection, the borrower can apply online,” explains Laurie Fielder, hired in 2013 as the CU’s VGreen loan program director. “The process is easy and fast. The applicant can get an estimate from their installer, apply, and sign their loan documentation electronically. During regular business hours and with a complete application, we can decide on the loan within 15 to 30 minutes. Vendors sell their products and then offer VGreen financing.”
VSECU dominates the state market because no other financial institution has focused on it.
“A few other lenders have home equity loans people can use for home improvements, but no local financial institution has customized loans that feature the rates and terms we offer,” Karparis says. “VGreen loans go up to $60,000 and offer terms as long as 20 years,” he reports. SunCommon customers choose between 12- and 20-year terms, with 12 being the most popular, according to Moore.
It works because Vermont has plenty of sun and renewable energy supporters. It works because state government and the public utility offer financial incentives to go green. And it works because VSECU has mastered the clean energy finance landscape.
“VGreen rates are discounted from the normal consumer loan rate,” Fielder says. “Our VGreen loan maximizes state and federal renewable and efficiency rebates, discounts and tax deductions. The typical borrower starts with one project, like a weatherization,” she explains, “and once they start to see the savings, they move on to other projects, like a solar installation.” VSECU even has a VGreen option for financing bicycle purchases, she adds.
“We have a centralized underwriting team of five energy lending specialists,” Karparis reports, “who know the specifics of a renewable or efficiency project. Sometimes a project involves multiple contractors, like an electrician, a roofer, a solar installer and a heat pump contractor. We can pay each vendor while the member has just one loan.”
VSECU has learned that clean energy financing means good credit quality. SunCommon prequalifies its prospects over the phone before pitching a solution, so it’s pretty sure they’ll get the loan, Moore reports. Less than 1 percent of VGreen loans have been charged off, Karparis says, making this the best performing as well as the fastest growing loan type in the CU’s portfolio.
Now the concept is going regional. VESCU and SunCommon both have expanded into New York State and partnered with the Northeast Sustainable Energy Association; VSECU can now offer VGreen financing to NESEA’s members, Karparis notes.
