Dominion Bond Rating Service today published an updated rating methodology for federal student loan ABS. Through the revised methodology, DBRS discusses the unique qualities of the Federal Family Education Loan Program (FFELP) loans, how these loans are financed via the capital markets, as well as the rating agency's specialized approach for rating ABS backed by FFELP loans.
"Although FFELP loans are at least 97% guaranteed, the loans include terms that introduce a variety of risks to ABS transactions," said DBRS Senior Vice President David Hartung in a company release. "These risks include liquidity risk, prepayment risk, interest rate and basis risk, as well as servicer risk. The loans are complex, unsecured,long-term instruments that often have large balances and are made most often to borrowers with little or nocredit histories. Given the number of variables in FFELP loan ABS transactions, DBRS provides a comprehensive, logical and transparent approach to analyzing the credit quality of these bonds."