Pitch
The DoubleGreen Loan Program enables moderate-income homeowners to make their homes safer, more energy-efficient and affordable.
Description
Summary
There is a gap in the current suite of weatherization products and services for moderate-income homeowners. Whereas families at 60% of Area Median Income (AMI) or below can utilize the free Weatherization Assistance Program (WAP) and middle to upper-income families can take advantage of the HEAT Loan offered through Navigant Credit Union and others, there is not currently an affordable loan product for moderate-income families that may not have excellent credit. For the purposes of this proposal, we estimate the target market to consist of families living in single-family homes that are between 60% and 200% of AMI. In Rhode Island, we estimate that there are 175,000 households, which represents 44% of total households in the state, that fall within this range and that could potentially benefit from the Capital Good Fund DoubleGreen Loan offering. (US Census Bureau. 2010 American Community Survey 1-Year Estimates. http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk) Finally, it is worth noting that as a result of this gap, the families most likely to live in older, inefficient homes, which are a unique characteristic of this state, are the ones that are least likely to be able to finance efficiency measures. Thus, a Capital Good Fund addition to National Grid’s existing Heat Loan program stands to capitalize on low-hanging fruit and, as a result, support the adoption of weatherization measures and the resulting energy savings that have been realized due to financial constraints.
Category of the action
Building efficiency, Social Action
What actions do you propose?
About Capital Good Fund
Capital Good Fund (CGF) is a non-profit, certified Community Development Financial Institution (CDFI) based in Providence, RI. CGF’s vision is an America free of poverty. We provide equitable financial services that build assets and create opportunity, and we work toward our mission by providing low-income families with one-on-one Financial & Health Coaching (FC +), unsecured loans of up to $2,000 for specific purposes—such as starting or expanding a small business or purchasing a computer—and free tax preparation through the IRS VITA program.
Since 2009, we have:
· Closed 316 loans totaling $306,039
o ~115 loans totaling ~$140,000 using current underwriting model
§ 1.07% default rate on these loans
§ 7.1% Portfolio at Risk (90+ days late)
· Provided free tax preparation to 692 families
o $831,000 returned to the community
· Provided Financial Coaching to 250 people
· Grown to a staff of eleven full-time employees and 13 Financial Coaches
Demographics
We provide financial services to those that would normally only have access to capital through fringe and predatory lenders such as payday lenders, check cashers, pawn shops, auto title lenders and other sub-prime lenders:
· 66% of our clients earn $17,000 or below per year, and 30% earn $17-44K
· 43% of clients are Latino, 35% are Black/African America, 20% are Caucasian and 2% are Black & Latino (multiracial).
· We have a near-perfect gender split (51% female, 49% male).
· With respect to age, 11% of clients are 24 or under, 33% are 25-34, 19% are 35-44, 26% are 45-54, 7% are 55-64 and 3% are 65 or older.
CGF proposes scale up its DoubleGreen loan program in a manner similar to the way in which Grid’s HEAT loan already works:
· Loan will apply to all the measures approved in the Heat Loan program
· Interest rate buydown to 0% APR
· Promoted through the EnergyWise home assessment program
CGF will, however, receive different terms on the interest rate buydown. Unsecured lending to moderate-income families is inherently risky; the interest rate must compensate for that risk. CGF charges 15% APR (fixed) on all loans. There is no application fee. National Grid and CGF have already signed a contract wherein the borrower will make principal-only payments of ~$100/month, and Grid will pay CGF 15% APR, regardless of loan performance. Thanks to this arrangement, the borrower will be able to realize a net savings over the life of the loan, while also increasing property value and ensuring safe indoor air quality. At the same time, the program will create jobs for weatherization contractors and reduce greenhouse gas emissions. For all these reasons, we believe that the DoubleGreen Loan Program can serve as a national model for public-private partnerships, bringing together regulated utilities, non-profits and businesses. At a time when greenhouse gas emissions continue to increase and jobless levels remain unacceptably high, the DoubleGreen model is urgently needed.
Who will take these actions?
CGF has already piloted the DoubleGreen Program with 6 loans, and has made the requisite refinements to scale to 50 loans in FY 2013. Throughout, CGF and Grid will work to improve efficiency, track job growth and energy-savings, and share lessons learned with other stakeholders.
One of CGF’s greatest strengths is that our Executive Director, Andy Posner, hold a Master of Arts degree in environmental studies from Brown University, and he wrote his masters thesis on energy-efficiency financing for moderate-income homeowners. As such, he has spent years studying the challenges to implementing such a model, and can guide CGF to success. A challenge will be ensuring that CGF can process and service the DoubleGreen loans in an efficient manner. Finally, another challenge will be securing the full support of National Grid—a huge, multinational corporation--so that the program is effectively marketed to the target population
Where will these actions be taken?
The DoubleGreen Program will be launched in Rhode Island, USA.
How much will emissions be reduced or sequestered vs. business as usual levels?
Roughly 1 ton of carbon emissions per home per year, or 1,000 tons of CO2 in year 1
What are other key benefits?
Each Program participant will also receive Financial & Health Coaching, leading to the following impacts:
1) Increase in credit score
2) Increase in household income
3) Improvement in banking status
4) Increase in savings
5) Increase in access to primary care
6) Improvement in overall well being
7) Increased food security
What are the proposal’s costs?
It will take $78,000 to run the pilot, with the costs broken down as follows:
1) Personnel: $51,000 (Loan Officer and Financial Coach)
2) Administrative Costs: $6,000
3) Loan Fund Costs:$15,000
4) Marketing Costs: $6,000
Time line
The first hundred loans will be disbursed by July 1st, 2014
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