SoFi’s consumer loan ABS pool shifts to shorter-term loans
Social Finance provides lower levels of credit enhancement than its third consumer loan securitization of 2019, with a shift towards more short-term lending compared to its first two pools this year.
The 2019-3 issue of the $ 549.2 million SoFi Consumer Loan Program Trust (SCLP) has a collateral pool of approximately $ 600.4 million of consumer loan balances from the accounts of high income borrowers.
The initial 30.46% credit enhancement level for the $ 420 million Class A notes is slightly down from SoFi’s previous transactions this year (31.46% and 33.45% for SCLP 2019- 2 and 2019-1, respectively).
The lower CE levels are consistent with slightly stronger credit characteristics than previous transactions, including a higher percentage of less risky short-term loans (24 and 36 months) accounting for 18.46% of the pool, compared to 16. 12% in SCLP 2019-2.
Longer-term 72- to 84-month loans fell from 28.45% to 20.77% of the pool, according to pre-sale reports.
Borrowers with FICOs above 740 also fell from 61.26% to 62.44%.
However, EC support will increase as the deal amortizes itself, with a target level of oversizing rising to 11% from the initial level of 8.47%.
The Class A Notes are rated AAA by Kroll Bond Rating Agency, DBRS and S&P Global Ratings. (SoFi’s consumer loan ABS transactions have been rated with triple A senior ratings since last year by both companies.)
Class B notes are valued at $ 31.1 million, with an AA + from Kroll and an AA from S&P. The $ 62.5 million in Class C tickets are rated A + / A by the agencies, while the $ 35.6 million in Class D tickets are rated only by Kroll (BBB +).
Kroll has a projected net loss range of 5.65% to 7.65% for the 2019-3 pool. The agency noted more than 60-day defaults in SoFi’s 2016 and 2017 vintage ABS pools, but says this is consistent with the entire consumer loan industry. Nonetheless, the agency raised expectations of losses in January for the SCLP 2017-1, SCLP 2017-3 and SCLP 2017-4 pools above Kroll’s initial estimates.
S&P itself has an expected 8% default rate on the transaction, down from 8.3% compared to its analysts’ default projections for SCLP 2019-2.
SoFi’s personal loans range from two to seven years (with seven-year loans representing 16.34% of the collateral) and cater to high-income borrowers with weighted average annual incomes of $ 155,896 and FICO scores of 755 in pool 2019-3. . WA monthly free cash flow to borrowers is $ 5,789.
The average loan amount per borrower is $ 32,265, which matches previous pools.
SoFi’s two previous transactions totaled $ 1.2 billion. Last year, the San Francisco-based company securitized about $ 2.7 billion in consumer loans.
SoFi has provided $ 14.7 billion in personal loans to 381,000 prime borrowers. As of March 31, it had $ 2.9 billion in multi-year financing capacity with nine warehouse lenders for its consumer loan program.
SCLP 2019-3 is SoFi 19the unsecured consumer loan transaction. It also issued 25 securitizations for its student loan refinancing program as well as a transaction backed by its new mortgage origination platform.
The deal is expected to close on June 7.
Morgan Stanley, Citigroup, Deutsche Bank, Goldman Sachs, RBC Capital Markets and Allen & Co. are the underwriters of the transaction.