A potential customer of a program or contractor.

A fund provided by third parties that provides partial risk coverage to lenders, meaning that the reserve will cover a pre-specified amount of loan losses resulting from customer defaults. This loss coverage typically allows financial institutions to offer a lower interest rate or longer term to borrowers, less restrictive underwriting requirements (e.g., higher application approval percentages), or both.  Loan loss reserves have been used to encourage financial institutions to offer products for financing energy efficiency and renewable energy projects.

The creation and maintenance of a loan through a series of procedural steps. Origination includes assembling the application file, issuing disclosures, underwriting the loan, processing the loan, producing required documents, collecting data, closing or settling the loan, and funding the loan. After a loan is closed, it is “boarded” (loaded into a database) and “serviced”. Servicing consists of sending monthly statements or invoices to the borrower, processing “remittances” (payments), updating the loan information, and performing “collection” activities for loans that do not pay on time.

The rate at which loaned funds return to the lender, taking into account pre-payments (e.g., partial or complete payoffs made prior to their due date), delinquencies (e.g., late payments), and defaults (e.g., losses or payments late enough to be considered losses by the lender). Expected loan performance will drive lenders’ decisions regarding interest rate, loan terms, and underwriting criteria, all of which influence customer uptake.

The requirements that an applicant must meet to receive a loan are referred to as the underwriting standard. Underwriting standards are based on lenders’ analysis of loan payment performance history that predicts annual losses from a portfolio of loans. Metrics for the analysis include individual borrowers’ credit score, income, debt, and employment.