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Developing Local Energy Efficiency Lending Programs Presented to the EARN Conference 2011

Developing Local Energy Efficiency Lending Programs Presented to the EARN Conference 2011 Localizing Finance Panel Milwaukee, Wisconsin September 14, 2011 Keith Welks Deputy Treasurer Pennsylvania Treasury Department. Public/Private Partnership Leveraging Public $$ and Private Delivery.

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Developing Local Energy Efficiency Lending Programs Presented to the EARN Conference 2011

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  1. Developing Local Energy Efficiency • Lending Programs • Presented to the EARN Conference 2011 • Localizing Finance Panel • Milwaukee, Wisconsin • September 14, 2011 • Keith Welks • Deputy Treasurer • Pennsylvania Treasury Department

  2. Public/Private Partnership Leveraging Public $$ and Private Delivery • Keystone HELP I 2006 - 2008 • Unsecured loans to $10K for ES improvements • Fixed interest rate for maximum 10-year term (2006: 7.99%; 2007-08: 8.99%) • Consumer oriented, contractor-centric program design • Housing Finance Agency introduces complementary program for secured loans to $35,000 • Keystone HELP II 2009 - 2010 • Unsecured loans to $15K for ES improvements (6.99% for maximum 10-year term) • Unsecured loans to $15K for advanced ES improvements (5.99% for maximum 10-year term) • Unsecured loans to $15K for improvements recommended by whole-house audit (4.99% for 10-year term) • Housing Finance Agency enhances complementary program for secured loans to $35,000

  3. Production To Date (through August 2011) • Loans made: 8509 (with secured: 9300) • Dollars lent: $57.2M (with secured: $74.2M) • Loss Reserve: approximately 8% of unpaid balance) • Original Average term approximately 7 years, with actual expected loan life closer to 5 years • Loan charge-offs to date of 1.48%, with late accounts totaling less than 1%

  4. Key to Success: Harmonizing Interests • Effective loan programs integrate, and maximize consonance between, critical participants • Borrower (necessary) • Simple – fast – cheap (if lucky: cost-effective) • Lender (Originator/underwriter/servicer) (necessary) • Easy to market to consumers – ability to control underwriting decisions – take out strategy • Contractor (highly desirable) • Easy to learn, easy to explain – competitive advantage – minimal additional paperwork, obligations • Program Sponsor (Supporting funds) (very likely) • Acceptable leveraging – relevant and effective projects – robust data/metrics • Capital Supplier (Aggregator) (very likely) • Alignment of economic interests – security – return – take out strategy

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