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Proposal to Sell $25 Million Residential Energy Efficiency Loans

KEYSTONE HELP (Home Energy Loan Program). Proposal to Sell $25 Million Residential Energy Efficiency Loans. July 2010. DISCLAIMER.

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Proposal to Sell $25 Million Residential Energy Efficiency Loans

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  1. KEYSTONE HELP (Home Energy Loan Program) Proposal to Sell $25 Million Residential Energy Efficiency Loans July 2010

  2. DISCLAIMER © Bostonia Partners LLC and/or its affiliates ("Bostonia"). All rights reserved. This information may be confidential. It is intended solely for the use of the intended recipient and should not be reproduced, disclosed or distributed without the prior written consent of Bostonia. If you are not the intended recipient of this material please delete and destroy all copies immediately. This material is for discussion purposes and your general information only. It does not constitute an offer to sell or the solicitation of an offer to buy a security. Bostonia is not bound to execute a transaction on these or any other terms and these terms cannot be relied upon as a representation that a transaction could have been or can be effected on the stated terms. You are solely responsible for trading and investment decisions with respect to any transaction and are not relying on Bostonia in connection with any such decisions, and Bostonia is not acting as an advisor to, or a fiduciary of, you in connection with any transaction. Before acting on any advice or recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. This material is not to be considered or relied on as accounting, legal, tax, or other advice and should be independently confirmed by you and your advisors prior to entering into any transaction. Bostonia does not provide accounting, legal, tax or other advice; the accounting, legal, or other implications of a particular transaction should be discussed with your advisors and or counsel. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives, and other agents) may disclose to any and all persons the US federal and state income tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Bostonia imposing any limitation of any kind. All information provided was supplied in good faith based on information that we believe, but do not guarantee, to be accurate or complete; however, we are not responsible for errors or omissions that may occur. Further information regarding this material may be obtained upon request. This material has been prepared based upon information that Bostonia believes to be reliable. Information (including opinions, prices and values) is only current as of the date indicated, and certain information presented herein was obtained from AFC First Financial Corp. However, Bostonia does not represent that this material is accurate, complete and/or current and accepts no liability if it is not. Bostonia accepts no responsibility for updating any opinion or other information contained in this material. The past performance of a market measure or instrument does not guarantee or predict a future performance. Further information on any of the securities or transactions mentioned in this material may be obtained upon request.

  3. KEYSTONE HELP PROFESSIONAL TEAM David Coultas Senior Advisor Bostonia Partners LLC Cell: (206) 909-3115 E-mail: davidscoultas@hotmail.com Salvatore Russo Senior Advisor Bostonia Partners LLC Cell: (206) 399-3252 E-mail: srusso44@gmail.com Howard BankerManaging Director Energy Programs Consortium Tel: (212) 455-9345 Cell: (914) 844-3134 Email:hbanker@energyprograms.org David CareySenior Advisor Energy Programs Consortium Tel: (978) 468-9932Cell: (978) 578-3242 Email: dcarey@energyprograms.org Benjamin BakerFinancial Analyst Energy Programs ConsortiumTel: (212) 455-9361Cell: (203) 521-8322Email: bbaker@energyprograms.org Elizabeth Randol, Ph.D.Policy DirectorPennsylvania Treasury DepartmentPhone:  (717) 772-1830Cell:  (717) 480-9548E-mail: erandol@patreasury.org Keith WelksDeputy Treasurer Pennsylvania Treasury DepartmentPhone: (717) 772-1830Cell: (717) 756-0916Email: kwelks@patreasury.org Christopher B. Craig, Esq.Chief CounselPennsylvania Treasury DepartmentPhone:  (717) 787-5871Email: ccraig@patreasury.org Stephen T. BurdumyPartner Drinker BiddleTel: (215) 988-2880Email: stephen.burdumy@dbr.com F. Douglas Raymond III Partner Drinker Biddle Tel: (215) 988-2880Email: doug.raymond@dbr.com Thomas F. Dooney Managing Director Bostonia Partners LLC Phone: (717) 772-1830 Cell: (610) 420-3504 E-mail: tdooney@bostonia.com Mark S. White Managing Director Bostonia Partners LLC Phone: (617) 226-8114 Cell: (781) 820-3717 E-mail: mwhite@bostonia.com Laurence H. Stone Managing Director Bostonia Partners LLC Phone: 617-226-8118 Cell: 617-513-7525 E-mail: stone@bostonia.com Sean F. Robertson Associate Director Bostonia Partners LLC Phone: (617) 437-0150 Cell: (617) 852-2007 E-mail: srobertson@bostonia.com Peter Krajsa Chairman & CEO AFC First Phone: (610) 433-7486 Cell: (610) 737-4977 E-mail: pkrajsa@afcfirst.com i

  4. Program Summary Loan Statistics Transaction Alternatives Historical Performance Loan Origination and Servicing Credit Guidelines Documentation Summary National Initiative TABLE OF CONTENTS

  5. 1. PROGRAM SUMMARY • Keystone HELP (Home Energy Loan Program) provides low interest rate consumer loans for Energy Star and energy savings home improvements. • 1-2 unit owner occupied with combined income less than $150,000. • Loans underwritten to guidelines acceptable to Fannie Mae for consumer energy • improvement loans. • FNMA has purchased similar loans for over 10 years. • AFC First is the originator, underwriter, administrator and servicer of Keystone HELP. • One of three Fannie Mae energy lenders in the nation. • “Contractor driven” marketing includes training, marketing support, education and • web integration. • Treasury expanded Keystone HELP statewide in 2006 with $20 million commitment. • Keystone HELP has successfully closed approximately 6,000 loans with nearly $37 million funded in the first three years. • Complete statewide reach - 65 counties and 1,000 AFC First/Keystone HELP • approved contractors.

  6. 2. LOAN STATISTICS • 46% of current balance • comes from 2009 vintage • Wtd avg loan age of 15.9 • months. • 69% of current balance • in 10 year term • 751 wtd avg FICO • 83% of loan dollar • originations are 700+ FICO. • Excellent delinquency • and charge-off history • 0.5% cumulative Charge-off • to date. • 1.28% 90+ days past due. Loan Count and Original Balance includes all loans program to date, including loans paid in full, charged-off, and delinquent to show full history. Loans offered for sale would exclude delinquent loans. Data as of June 30, 2010.

  7. Option 1: Bank Loan Participation Agreement (“BLPA”). Treasury enters into a participation agreement with a syndicate of lenders who acquire undivided fractional interests in each loan. Treasury remains the agent/lender and engages AFC First as initial servicer. Treasury provides credit support against possible defaults using an escrow or reserve fund of approximately 3-5% of the aggregate loan balances. • Option 2: Structured Loan Participation Trust (“SLPT”). Treasury assigns all of the loans to a pass-through entity (e.g. a business trust). The entity issues “participation certificates” to investors that represent the right to pro rata cash flow from the loans. AFC First would be the initial servicer. Treasury can provide credit support either by taking back a subordinate participation certificate or by providing an escrow or reserve fund as in Option 1. The participation certificates would qualify for deposit into a bank’s loan portfolio. • Option 3: Whole Loan Sale (“WLS”). This approach assumes the sale of the entire portfolio of loans “as is” to a bank that is in the business of purchasing whole loans from originators. 3. TRANSACTION OPTIONS 3

  8. Option 1: BLPA Structure Bank Loan Participation Agreement Structure Treasury Excess, if any Purchase Price Reserve Amount Participation Interest Payments, if any Banks Reserve Fund 4

  9. Option 2: SLPT Structure Structure Loan Participation Trust Structure Treasury Loans Cash and Sub Certificates Servicing Fee Pass-Through Entity Servicer Loan Servicing Senior Certificates Investors Cash 5

  10. 4. HISTORICAL PERFORMANCE - CREDIT Data as of June 30, 2010. • Strong credit performance – 0.53% program to date cumulative defaults. • Defaults only increase to 1.28% if 90+ DPD accounts are included. • Underwriting guidelines acceptable to Fannie Mae. • Borrower achieves loan motivation – energy efficiency. • Goal is for utility savings to offset loan payments, so borrower total payments remain the same.

  11. 5. LOAN ORIGINATION AND SERVICING • AFC First Financial Corporation is an experienced specialty energy efficiency lender and the provider of the EnergyLoan® program. • Founded in 1947 in Allentown, PA. AFC has processed over 50,000 energy efficiency loan applications. • Retail contractor-driven energy lending to consumers has been primary business since 1999. • AFC First is one of only three Fannie Mae approved Energy Lenders in the nation. • Currently lending in 20 states with over 2,500 Approved Contractors, Manufacturer, Utility and State and Municipal Partners. • AFC First Financial’s key energy efficiency financing services include: • Contractor Recruitment, Screening and Training. • Loan Application Intake and Processing. • Loan Servicing, Off and On Bill. • Payments to Approved Contractors including Verification of Satisfactory Completion. 8

  12. AFC First Financial Corporation is Co-Creator and Administrator of Pennsylvania’s Keystone HELP Energy Efficiency Loan and Rebate Program with the Pennsylvania Treasury Department and PHFA and DEP, one of the nation’s most successful programs. • Co-Creator and Administrator of Connecticut’s innovative state solar leasing program, CT Solar Lease, the first rate payer funded residential solar leasing program in U.S. • AFC First also operates consumer financing programs for National Grid, Duke Energy, Progress Energy and others. • Focus is on simple, contractor-driven residential energy efficiency financing programs including training, marketing support, education and web integration. • Simple, state funded monthly payment contractor driven programs have been the easiest to implement and are having the greatest success (NYSERDA, PA’s Keystone HELP, CT Solar Leasing). 5. LOAN ORIGINATION AND SERVICING 9

  13. 6. CREDIT GUIDELINES • Keystone HELP provides unsecured consumer credit originated for the acquisition and installation of energy conserving equipment and material. • Keystone HELP incorporates a FICO score based review that includes a debt-to-income ratio • analysis and verification of employment in the approval process. • Eligible Installations include Energy Star certified improvements or other Department of Energy approval. • Program Characteristics: • Single-family (1-4) owner-occupied properties. • Original Maturity Range: Two to Ten years. • Minimum FICO Score: 640. • Maximum Debt-to-Income: 50%. • Independent Employment Option: 680+FICO Score.

  14. Loans may be eligible for CRA credit. • HUD Median Income per Fannie Mae website (2009-2010). • Depository Investors should research further to determine if certain loans satisfy their CRA obligations. CRA – TOP 5 MSA’S 11

  15. Option 1—Bank Loan Participation Agreement • Participation Agreements with each participant setting forth the economic and other rights of the participant. • Escrow Agreement for reserve fund. • Assumption Agreement regarding servicing (if purchaser wants to maintain AFC First Financial Corp. as servicer). • Existing servicing and loan documents might remain in place or need to be amended for bank participation structure. Option 2—Structured Loan Participation Trust • Pooling and Servicing Agreement, or separate Loan Sale Agreement and Assignment and Assumption Agreement regarding servicing. • Pass-Through Entity formation documents. • Escrow Agreement (if reserve fund is used for credit support). • Certificate Purchase Agreement with placement agent. • Possibly a disclosure document, likely a Placement Memorandum. • Blue sky compliance. Option 3—Whole Loan Sale • Loan Purchase [and Interim Servicing] Agreement. • Assignment and Assumption Agreement regarding servicing (if purchaser wants to maintain AFC First Financial Corp. as servicer). 7. DOCUMENTATION SUMMARY 12

  16. The proposed sale of $25 Million of Keystone HELP loans is part of a larger national initiative of (initially) seven states to foster secondary market liquidity in consumer energy loans nationally. • The States are working with Energy Programs Consortium (“EPC”). EPC is recieving funding from the United States Department of Energy in support of this effort. • EPC and States are working together to use the FNMA conforming loan model to create a warehouse facility to accumulate loans on a flow basis for aggregation and sale to permanent investors. • The First Step in the Process is to solicit indications of interest and pricing/structure feedback in Keystone HELP loan pool purchase with a view toward sharing relevant information with the national initiative. • The Second Step in the Process is to select one or more institutional investors to negotiate a transaction for the acquisition of the Keystone HELP loans. • EPC is an active participant in the proposed sale of this portfolio. 8. KEYSTONE HELP - PART OF NATIONAL INITIATIVE 13

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