The next “green” securitization is likely to be from the Warehouse for Energy Efficiency Loans (WHEEL) program. The public private partnership is offering its mostly 10-year unsecured loans via New York Green Bank and will expand to three new states by the start of 2015.
The loans are initially being purchased by Renewable Funding, which has a $100 million warehouse line of credit with Citibank. Francisco DeVries, Renewable Funding’s CEO, says the firm could be ready to securitize the loans as early as December.
The WHEEL program was first announced in April; in October it entered into a partnership with the New York Green Bank to finance energy projects across the state. The idea is to make it easier for states to offer energy efficient financing to utilities, contractors and homeowners. Approved local contractors will offer low-cost financing directly to consumers.
Renewable Funding will aggregate the loans that it purchases into diversified pools that will be securitized and sold to institutional investors.
Renewable Funding is the same firm that pioneered the Property Assessed Clean Energy (PACE) program, which has resulted in two securitizations to date by California’s Western Riverside Council of Governments, one for $104 million in March and another for $129 million in October.
More recently, the State of Hawaii sold $150 million of bonds backed by a surcharge on electric bills; proceeds will finance solar panels and other energy efficient upgrades for residents and businesses.
WHEEL funds residential energy efficient retrofits similar to residential PACE. The loans are unsecured; have terms of three-, five- or 10-years; pay a fixed-rate of interest of 7.99% for a single project of 2.99% for a “whole house” project; and can be as large as $15,000. They are available to borrowers with FICO scores of 640 or higher.
Unlike PACE loans which are secured by a lien on the borrower’s home and typically repaid via a special assessment on property taxes, WHEEL loans do not face a regulatory challenge. The Federal Housing Finance Agency objects to the lien that PACE financing creates because it is senior to the liens held by Fannie Mae and Freddie Mac.