At the same time as Connecticut homeowners are turning to the huge stores of equity built up in their houses to fund renovation projects, the quasi-public CT Green Bank is trying to get more lenders to offer its successful loan product aimed at residential energy upgrades.
The Green Bank announced Tuesday that it’s seeking lenders to join its 11-year-old “Smart-E Loan” program as it expands to reach more homeowners across the state, particularly low- and moderate-income homeowners and communities of color thanks to funding from the state Greenhouse Gas Reduction Fund.
Smart-E loans are unsecured five- to 20-year loans that homeowners in one- to four-family homes can use to pay for energy energy efficiency, renewables, health and safety, and environmental resilience renovations. The loans require no down payment and are designed so that the renovations they pay for are “cash flow positive,” an RFQ issued by the Green Bank said.
Interest rates on the loans run from 5.99 percent to 7.49 percent, although rates are scheduled to increase on Sept. 1. Loans typically run between $500 and $50,000, but lenders can offer exceptions that let loans get as big as $75,000.
“As the program continues to grow and evolve, serving diverse homeowners and contractors across the state, we are excited to add new credit unions, local and regional banks, and other lenders to our existing core group of partners,” CT Green Bank Chief Investment Officer Bert Hunter said in a statement.
The CT Green Bank partners with banks and credit unions to offer the loan. The lenders help market the loans and then process and underwrite applications and administer the loans, including checking to make sure that borrowers are using CT Green Bank-vetted contractors, who typically market the loan directly to their customers.
To many banks, that might seem like a lot of work for a smaller, unsecured loan that might compete with their HELOC business. But according to the Green Bank RFQ, of the 8,806 Smart-E loans made between 2013 and 2023 worth $170 million, only 214 charge-offs have been recorded, 159 from a single lender who’s also responsible for 74 of the 90 currently delinquent loans.
“The Smart-E Loan portfolio loan performance is consistently strong due to a well-qualified applicant pool. While the loan is unsecured, it behaves like a secured loan from a loan performance standpoint. The typical reason for a charge off is a major life event (i.e., death, divorce). The average FICO score on outstanding
loans is 745,” the RFQ document says, although the minimum FICO score is only 580 with a 50 percent maximum debt-to-income ratio.
And the loans also bring new customers to participating banks who can also be offered products like credit-builder and savings-builder programs, the RFQ states, which come with a low cost relative to the long-term income stream. Over 90 percent of loan volume has historically come from borrowers who were new to the bank overseeing the loan.
A virtual information session for lenders will be held on Wednesday, Aug. 7 at 1 p.m.
