LendingClub’s third self-sponsored securitization of online marketplace loans is benefiting from the company’s recent tightening of credit standards.
The loans backing the $330 million Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P2 involve borrowers with higher FICO scores that have allowed LendingClub to reduce its credit enhancement levels on the deal.
CLUB Credit Trust 2017-P2 has a collateral pool of 22,062 prime, consumer loans with a cumulative net balance of $368 million, or an average account balance of $16,681. The average interest rate on the loans is 15.18%.
The bond tranches include $239.4 million in Class A notes that have a preliminary A- rating from Kroll Bond Rating Agency, similar to the rating agency’s grade for the CLUB 2017-P1 deal issued in September.
The base-case loss range for the new deal is 13.25%-15.25%, tightened from the 14%-16% range Kroll assigned the previous deal.
The new deal is the third since June that has involved loans LendingClub originated and kept on its own books for securitization. In prior deals LendingClub served only as matchmaker between borrowers and investors, who sponsored deals that presented no alignment of interest with LendingClub’s originations.
LendingClub’s new securitization model now involves acquiring loans and sponsoring securitizations for more regular shelf offerings. It contributed 95.92% of the loans to the current deal which is the second transaction under its CLUB prime securitization model.
In the third-quarter earnings call for LendingClub (NYSE:LC), the lender’s management team noted its shift to higher-quality credit borrowers and a reduction in loans to borrowers that qualify under its lower credit tiers (the lowest of which were not included in the new asset-backed transaction).
The percentage of borrowers with credit scores between 660-679 was reduced to 27.55% of the pool from 42.22% from the prior transaction. Those with scores above 700 surged to 46.35% of the pool from 31.18%, raising the weighted average FICO of the pool to 703 from 692.
The average interest rate in the pool was reduced to 15.18% from 15.56%.