Energy Efficient Improvement Loans
Offered Through New Program
Fannie Mae and
VlEWtech are partnering with utilities to offer unsecured consumer loans to
homeowners who want to make energy efficiency improvements.
new ways to generate energy efficiency improvements among residential
Volt VlEWtech, a wholly-owned subsidiary of Volt Information Sciences, Inc., (a
Fortune 1000 company) has opened the National Energy Loan Center to help Fannie
Mae (the nation's largest supplier of home mortgage funds) originate and service
energy efficiency loans.
Fannie Mae and
VlEWtech are partnering with
utilities to offer
unsecured consumer loans to homeowners who want to make energy efficiency
improvements. Homeowners may borrow up to $15,000 for up to 10 years -- at fixed
rates -- to install high-efficiency HVAC equipment and other energy-related
which operates over 30 different residential finance programs, implemented
Fannie Mae's first energy loan program for Pacific Gas & Electric Company.
Since July 1995, VlEWtech has approved more than 12,000 loans totaling $80
million for the utility's customers.
National Energy Loan Center, utilities and their customers can benefit from
below-market, tiered interest rates, quick loan approvals and streamlined
receives loan applications directly from approved contractors, and underwrites
and originates loans to program guidelines. After issuing the loan check,
VlEWtech transfers loan obligations to Fannie Mae, but continues to collect
Fannie Mae's chief goals is to reduce the cost of home ownership," explains
David Carey, Fannie Mae's director of energy finance. "We recognize that
after the mortgage itself, the greatest cost in owning a home is energy. These
loans are intended to reduce that cost."
believes gas and electric utilities are key in promoting energy-efficient loans
through bill inserts, newsletters and other means. In addition, utilities can
decide what types of energy efficiency improvements are most appropriate and can
monitor the quality of installations.
According to Ed
Thomas, director-sales and marketing for Volt VlEWtech, participating utilities
sign a loan service agreement with the National Energy Loan Center, plus an
agreement with Fannie Mae which addresses loss-sharing on any loans that may
default. Basically, it creates a "private-label consumer loan program for
the utility," he says. "We handle the back-office work and service the
loan so the utility can get all the benefits of a full-service loan operation
without any of the overhead costs."
risk-free endeavor for utilities, Thomas says. Fannie Mae pays fixed monthly
operations costs. Volt Viewtech recoups the cost of originating and servicing a
loan through the interest rate. The utility benefits by being able to offer
another customer convenience.
The program has
already generated a lot of interest. "As utilities make the transition into
a deregulated environment, they're looking for new options to replace the
rebates and other subsidies traditionally offered to customers for
energy-efficiency improvements," Thomas says.
utilities determine the conditions of the program, including which contractors
may be allowed in the program and what equipment or materials can be
Services, the largest natural gas distributor in Connecticut, was the first to
sign on. Working through its unregulated sister company, Yankee Energy Financial
Services (YEFS), Yankee Gas offers its customers 10-year 8.5 percent fixed-rate
loans for qualified equipment, such as gas-fired furnaces that are at least 90
percent efficient, and gas-fired boilers at 82 percent efficiency or above.
Matt Ide, manager, YEFS, the agreement with the National Energy Loan Center has
been a great improvement over its former alliance with a local bank. The service
has been streamlined, the delivery system is much faster, and it removes several
qualification restrictions that were in effect under the old system. For
instance, he says, now YEFS can lend money to property owners who rent out their
YEFS has also
changed the way it markets the service, Ide says. "We've switched from a
traditional utility mentality to a market-driven mentality that has helped us
look at things from the customers' point of view." For example, customers
are used to receiving instant financing approval with other transactions. Plus,
many want to finance other home energy needs at the same time. YEFS only
requires that a gas furnace or water heater constitute at least half of the loan
promotion of the program has become a two-pronged marketing approach where both
contractors and customers are encouraging each other to get involved in the
program," Ide says.
HVAC contractors enrolled in the program love it because they can offer their
customers attractive on-the-spot financing. "The HVAC contractors in our
area are mostly fuel-neutral," Ide says. "They just want to sell a new
furnace or boiler. The availability of these loans gives them an incentive to
recommend natural gas."
customers have actually helped push their non-enrolled contractors into the
program because they want to take advantage of the financing they read about in
their Yankee Gas bill inserts.
While the loans
will generate a profit for YEFS, they are mainly seen as a tool to win a
competitive advantage over electric utilities and fuel oil dealers.
information, call 800/355-8439.
article was printed in the November 1997 issue of Midwest Gas Associations
INNOVATIONS magazine. For more information regarding this publication, please
contact Ali Brammer at 612/832-9915.
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