PenFed Goes Solar in Loanpal Deal

PenFed, the nation’s third-largest credit union, announced Monday a partnership to buy solar loans from Loanpal as part of its strategy to expanding its portfolio of unsecured loans.

PenFed’s VP of lending, Jay Fee said the credit union, based in Tysons, Va., ($24.8 billion in assets, 1.8 million members) hopes to eventually originate its own solar loans, but the current model will allow it to gain experience with the complexities of solar loans, including tax credits that vary by state and vetting contractors.

Nearly 315,000 U.S. households added solar energy systems in 2018, and installations rose by 7% based on generating capacity, according to a report by Wood Mackenzie Power & Renewables and Solar Energy Industries Association. They expect total photovoltaic capacity, including utilities and other non-residential installations, to rise 14% this year.

While California remains the largest market, their reports show most of the growth is coming from states that have been solar shy, including Texas and Virginia, both home to large numbers of PenFed members.

Loanpal is the public-facing name of Paramount Equity Mortgage based in Roseville, Calif., near Sacramento. The loan purchase arrangement is the 14th for Loanpal, which has originated more than $2 billion in residential solar loans since 2018 or 30% of all U.S. solar loans originations.

Loanpal will manage the entire lending experience, including installer management, origination, funding and servicing. Loanpal will also provide real-time performance data and insights into the PenFed portfolio via Loanpal’s investor portal.

“Loanpal’s focus on generating high-quality customers with low default rates and increased prepay speeds aligns well with PenFed’s desire to help more people save money on their everyday expenses,” Fee said.

Loanpal CEO Hayes Barnard said most homeowners want to tap into clean energy products, but less than 2% of them actually do.

“Access to smart, efficient capital is key to clean energy adoption and we’re able to help drive that change by partnering with forward-thinking companies like PenFed who want make a positive impact,” Barnard said.

Solar loans through Loanpal perform far better than credit cards or debt consolidation loans because the customers typically are wealthier, have better credit histories and are financing equipment attached to their home, Fee said.

Loan amounts are usually about $30,000. While terms are usually set at 10 to 15 years, most are paid off with four to five years, he said.

One installer, SolarMax Technology Inc. of Riverside, Calif., has its own financing arm for solar systems as well as an April 2018 financing agreement with Loanpal for storage systems.

Loanpal offered loans with terms ranging from 10 years with an annual percentage rate of 2.99% to 20 years at 5.99%. SolarMax agreed to pay Loanpal program fees ranging from 15.5% of the loan value on the 2.99% loan to 8.99% on the 5.99% loan. Maximum loan amounts were $100,000 for customers with FICO scores at or above 700, $50,000 for those with lower scores.

About a third of SolarMax’s U.S. revenues come from systems financed in-house. Its portfolio stood at $37.5 million as of June 30, generating $987,617 in revenue from January through June, according to its Nov. 3 prospectus.

Since March, PenFed has rapidly expanded its portfolio of unsecured loans — excluding private student loans and credit cards. As of Sept. 30 it held $1.1 billion of these other unsecured loans, up 60% from a year earlier and with $384 million added in the previous six months.

Fee said his goal is to build a program in which PenFed can sell participations of these loans to smaller credit unions.

PenFed’s total loan portfolio actually fell 1.4% in the 12 months ending Sept. 30. From January through September, PenFed’s total loan originations fell 5.9% to $7 billion, while its sales of first mortgages to the secondary market rose 40% to $891.3 million.

Among all credit unions, other unsecured consumer credit grew 8.9% to $46.6 billion, as total loans grew 6.5% to $1.12 trillion. Other unsecured credit’s share of total loans grew 9 basis points to 4.2%.