Commerce, Minnesota Housing partner to create more energy efficiency loan opportunities

July 24, 2014

Release from MN Department of Commerce http://www.mn.gov/commerce/energy/ :

SAINT PAUL, MN – Minnesota consumers now have a new energy efficiency home improvement loan program that allows more people to access low-interest, unsecured loans and make important energy efficiency upgrades, thanks to a partnership of the Minnesota Department of Commerce and Minnesota Housing Finance Agency.

The Commerce Department provided $1 million for a loan loss reserve that allows Minnesota Housing to lend up to $10 million through its Fix Up Loan Program for Minnesota homeowners to make home energy improvements. The loans will help pay for upgrades like new high efficient heating and air conditioning systems, new water heaters, insulation and air sealing, new light fixtures, and replacement windows. Homeowners who qualify may borrow up to $15,000 at a 4.99 percent interest rate without placing a lien on their property.

“This new loan program is a win-win for Minnesota: It strengthens the state’s housing stock and saves energy, reduces carbon emissions, and creates jobs,” said Commerce Commissioner Mike Rothman. “It’s an innovative collaboration of two state agencies combining resources to incentivize energy efficiency.”

Minnesota Housing began offering the 10-year term loans in May; so far about 35 loans have been originated by lenders. The maximum loan amount is $15,000. Minnesota Housing expects that $10 million in available resources can fund 750 to 1,000 loans. The energy savings from the program will be measured over the course of the loan program.

Unsecured loan offers less risk, more incentive
“We’re excited about the result of our partnership, especially in the wake of the housing crisis,” said Mary Tingerthal, Minnesota Housing Commissioner. “This type of unsecured loan is attractive to homeowners, especially homeowners who may not have a lot of equity in their property or seniors, who may be reluctant to add another lien to their property.”

Consumers with a credit score of 680 can qualify for the loan program. There is no income limit. Minnesota Housing anticipates that the default rate by borrowers in this program is expected to be low. To offset the risk of unsecured loans, the Commerce Department provided the loan loss reserve through American Recovery and Reinvestment Act (ARRA) funds.

Homeowners repay their energy efficiency loans through monthly payments. The loan loss reserve will help ensure funding is available in the future to make new loans for consumers. With a loan loss reserve of $1 million, Minnesota Housing expects the program to be sustainable.

Energy savings, job creation measured
Energy savings will be tracked and reported quarterly. Homeowners agree to share the information related to their home and the energy efficiency upgrades they make, so that calculated energy savings can be reported. Homeowners will also work with their contractors to determine the funds spent on labor and the number of hours it will take to complete a job. This information will help in reporting energy savings and the job creation aspects of the program.

“Residential buildings are one of the best opportunities for reducing energy consumption, and Minnesota homeowners have a unique interest in reducing their home’s energy use to help their family budgets,” said Rothman. “This program gives the state an opportunity to quantify outcomes related to energy savings and job creation.”

The new energy efficiency loan program is the second time Commerce and Minnesota Housing have combined on an energy efficiency project. The first project was in 2009-2010 when the ARRA-funded Energy Saver Rebate Program provided rebates to Fix Up Loan participants who made energy efficiency home improvements. The program served over 2,000 Minnesota households.

To learn more about Minnesota Housing’s new energy efficiency loan opportunity, visit its website or call 651-296-7608 or 800-657-3769