U.S. Department of Energy Energy Efficiency and Renewable Energy

Implementing Loan Loss Reserve Fund Agreements

Implementation of a loan loss reserve fund (LRF) program typically involves two agreements:

  • The LRF Agreement between the financial institution partner(s) and the American Recovery and Reinvestment Act (ARRA) grantee, which addresses the deposit and use of the LRF monies

  • A less formal energy efficiency loan program agreement between the financial institution partner and the ARRA grantee and/or other program partners, which addresses the full energy efficiency loan origination cycle, including cooperation in loan marketing, credit screening and analysis, and other steps involved in loan origination, as well as marketing and reporting responsibilities.

For definitions of typical terms used in those agreements, see Key Terms Used in LRF Agreements. Also see the sample LRF agreementpdf.

The typical LRF structure is illustrated in the figure below. 

An image of a diagram entitled, "Loan Loss Reserve Fund, Typical Structure." It shows an oval labeled "USDOE" with an arrow pointing to another oval labeled "Local government ARRA Grantee." Next to the arrow it says, "ARRA $ & grant agreement." The oval labeled "Local government ARRA Grantee" has an arrow pointing to a rectangle labeled "Financial Institution(s)," which has an oval inside labeled "Escrow Account/Loss Reserve Fund." Above the arrow pointing to it, it says "LRF$," and below the arrow it says "LRF Agreement." And below the rectangle labeled "Financial Instiution(s)" it says "Load Reserve Fund supports Loan." From the rectangle labeled "Financial Institution(s)," there's an arrow labeled "Loans" pointing to a vertical rectangle, with three circles inside, labled "Residential Borrowers."