A pool of Federal Family Education Loan Program (FFELP) loans will secure $353.6 million in asset-backed securities through the ECMC Group Student Loan Trust, in its first pool of rehabilitated loans since 2021.
About 94% of the loans in the pool are rehabilitated, according to Moody's Ratings.
The series 2024-1 will issue notes through two tranches, a class A and B, bot of which are due in November 2073, according to Fitch Ratings. The class A and B notes benefit from 6.40% and 3.15% in credit enhancement, respectively. Ratings analysts at Moody's say the notes will pay coupons benchmarked to the Secured Overnight Financing Rate (SOFR).
J.P.Morgan Securities is arranger and manager on the deal, according to Fitch and Asset Securitization Report's deal database.
That the FFELP loans are indirectly guaranteed by the U.S. Department of Education is one of the credit strengths, Moody's said. Also, the notes benefit from excess spread, which will average between 50 and 90 basis points annually, most likely, the rating agency said. There is also a reserve account amounting to either 4.55% of the pool balance from the closing date to October 2025—which could decline to 1.00% of the pool balance after October 2026—and $1 million.
Another credit advantage to the notes is a full turbo mechanism. On or after the September 2030 distribution date, the transaction will pay principal to the notes instead of to certificate holders, using excess collections, Moody's Ratings said. Also, Nelnet is the subservicer on the deal.
All those positive attributes will offset a couple of credit challenges, including the composition of the pool. Also, the loans have their special allowance payments indexed to the 30-day average SOFR, and the rest are indexed to the 91-day treasury bill, creating basis risk mismatch between the assets and the notes.
Moody's assigns Aaa to the class A notes and A1 to the class B notes. Fitch assigns AA+ on the class A notes.
