Foundation Finance is rolling up its sleeves for a $375.4 million issuance of securitization bonds, backed by a pool of home improvement loans, with a pool that shows slightly stronger underlying borrower credit than its previous deal.
Foundation Finance Trust 2025-1 is secured by 21,569 contracts, usually financing projects including windows, roof replacements, heating, ventilation and air conditioning systems. The loans in the pool have a weighted average (WA) FICO score of 722, slightly higher than the 718 FICO score seen on the Foundation Finance Trust 2024-2 deal, according to Kroll Bond Rating Agency and Moody's, which assessed the deal.
While interest rates and loan balances higher on FFIN 2025-1, compared with the 2024-2 series, the loans also have almost the same WA original term—just one month longer, at 141 months, according to Kroll Bond Rating Agency. From the Q3 2021 to the early 2024 vintages, KBRA said, cumulative gross loss (CGL) levels had been trending up, likely due to consumer credit normalizing, due to inflationary pressures.
The Interest rate on the collateral, on a weighted average basis, was higher, at 12.87%, compared with 12.78% on the FFIN 2024-2, but the WA note coupon was 5.85%, higher than the 5.05% that the 2024-2 deal paid out, KBRA said. On balance, that left the 2025-1 series with less total gross excess spread, at 6.03%, down from 6.73%on the 2024-2, according to the rating agency.
KBRA says it has a base case cumulative net loss (CNL) expectation of 8.05%, an increase of 1.04% over the cumulative net loss on the FFIN 2024-2 notes.
FFIN 2025-1's A, B, C, D and E notes benefit from credit enhancement levels of 35.0%, 20.7%, 14.9%, 6.00% and 1.50%, respectively, KBRA said. Moody's said all the notes benefit from initial overcollateralization representing 1.00% of the note balances, and initial reserves that represent 0.50% of the balances.
All the notes have an April 15, 2050 legal final maturity date.
Moody's assigns Aaa to the class A notes.
KBRA assigns AAA, AA-, A-, BBB- and BB to the A, B, C, D and E notes, respectively.
