How Does ECO-Link Work?
The Treasurer’s Office funds a below market rate linked deposit at a participating ban using a formula based on loan terms, in the form of a certificate of deposit or another financial instrument. The lender then agrees to pass along up to a 3% interest rate reduction to the homeowner. (With this model, the state earns a reasonable return on the linked deposit funds while leveraging resources in local communities to boost home value and job creation.)
Ohio residents who are a homeowner or proprietor of an eligible residential classification completing various home improvements can participate in ECO-Link.
The lending institution will use its usual internal lending standards and guidelines to determine the credit worthiness of the potential borrower. The term and size of the loan is solely decided on by the lender. The Treasurer’s office can provide the rate reduction for up to seven years on loans up to $50,000. The option of a seven year rate reduction can only be applied if the loan is for more than $25,000. The rate reduction cannot be renewed.
How is the amount of the linked deposit determined?
The amount of the deposit is based on the following formula: Approved ECO-Link amount * Loan term (in years)
How is the ECO-Link rate reduction determined?
The ECO-link interest rate reduction of up to 3% is calculated by the Ohio Treasury using current market investment indicators, and the negotiated home improvement loan rate. As of 6/7/2019 the linked deposit and home improvement loan discount rates will match.
Each bank will be required to identify one or more authorized contacts that can provide updates for the bank’s two year CD interest rate offered to account holders quarterly, or on demand by using this form.
Interest Rate Calculation Example: Using a recent two year CD interest rate average for participating banks, the interest reduction on a home improvement loan rate of 5.75% would be reduced by 1%. The linked deposit interest rate placed at the bank would be discounted by 1% from that bank’s two year CD interest rate offered to account holders (for this example the average two year CD rate was 2.43%, so the linked deposit would be placed at 1.43%). Note that the ECO-link program will use a (term * approved funding amount) to place the linked deposit at the bank. For more details about this discount rate model please contact our office.
How does ECO-Link benefit lenders?
- ECO-Link increases the amount the financial institution has available to loan
- ECO-Link brings an additional deposit to the financial institution
- ECO-Link serves as a great marketing tool to attract new and retain existing customers
- ECO-Link is easy to use and cost efficient
- ECO-Link participation can count towards the lender’s Community Reinvestment Act (CRA) dollars
In order to participate, the lending institution must be a state depository bank. If you would like participate but are not yet a depository bank, please visit the Depository Process webpage to learn how.
Who can complete the home improvement projects?
Contractors, service providers or homeowners. Homeowners may purchase the products and complete the projects themselves with proper documentation. If this is the case, the State Treasurer’s office requires copies of all receipts pertaining to the approved project. When applying to the ECO-Link program, all documentation will need to be submitted electronically as attachments to the application.
Other TOS Programs you may be interested in:
- Bid Ohio: This program provides monthly auctions for banks that are looking for deposits. For more information please visit the Bid Ohio webpage.
- OMAP: The Ohio Market Access Program provides credit enhancement to local governments and schools in Ohio issuing short-term municipal notes. Standard & Poor’s has assigned its highest short rating, “SP-1+”, to OMAP which enables issuers to save money on debt service costs and improve market access.