First Help Financial is preparing to sponsor a $250 million in asset-backed securities transaction from a pool of auto loan contracts, in what might be its largest deals by several measures since the series 2021-1 from the program sold notes to investors.
Known as FHF Issuer Trust 2023-2, the deal's total securitized portfolio amount and the average remaining loan size is $34,252, both the largest that it has been in at least a couple of years, according to Moody's Investors Service which is assigning ratings to the notes. Contracts on new and used automobiles
Needham, Mass.-based First Help Financial, the loans' originator and servicer, is a niche auto lender with 16 years in the business of lending to customers with varying credit qualifications. A substantial portion of its customers have trouble obtaining financing from traditional sources due to either their limited credit histories or cash incomes, or both. These customers account for 48.97% of the pool, while the rest of borrowers have a weighted average (WA) FICO score of 678, according to Moody's.
The transaction will issue notes through six tranches of notes, in a deal where J.P.Morgan Securities, Deutsche Bank Securities and Goldman Sachs & Co., are acting as lead underwriters, according to Moody's ratings analysts. The company expects to assign ratings of 'Aa2' to the A2 notes; 'Aa3' to the class B notes; 'A3' to the class C notes and 'Baa3' to the class D notes.
FHF Issuer's securitized amount and loan size are not the only pool characteristics that have expanded over time. Among the underlying loans where the borrowers do have a FICO score, the weighted average is 678, the highest since the 2021-1 deal, when the WA FICO score was 671, Moody's said.
Not all characteristics have changed for the better, however. The collateral's loan-to-value (LTV) ratio is 109%, which increased gradually from 100% LTV level seen on the 2021-1 deal, according to Moody's. The rating agency also expressed concern about FHF's relatively small size and financial weakness as servicer and sponsor. The company's default probability is unknown, which raises its servicer default probability.
Still, some of these servicer risks are offset by Deutsche Bank National Trust's participation as custodian, Moody's said. Should FHF be terminated as servicer, Deutsche will maintain the original certificates of titles, the rating agency said.
Moody's noted that the notes benefit from several key credit strengths, including a strong backup servicer, Vervent. Secondly an overcollateralization tranche representing 4.00% of the pool's assets at closing, is expected to build to a target of 5.00%, which helps ensure the notes' timely repayment to investors, according to the rating agency.
