LendingPoint Pass-Through Trust, Series 2022-ST4, is preparing its fourth series of asset-backed securities, looking to raise $57.6 million, secured only by debt consolidation or credit card refinancing loans to pay for a home improvement, or to make a major purchase.
The deal’s sponsor, LendingPoint, refers to the consumer installment loans in the collateral pool as DTC loans, and are categorized as either newly originated or renewal loans, according to Kroll Bond Rating Agency. Renewal loans are granted to existing customers in good standing, allowing the company to offer a more competitive interest rate or term for existing customers who have already paid down a portion of the existing loan.
Compared with the LPPT-ST3 transaction, the collateral for the current deal on offer has a higher concentration of loans in the A2 and B1 grades, which have the lowest probability of default, as well as B2, according to KBRA.
LPPT Series 2022-ST4 will issue just one class of notes, rated ‘BBB-’ with overcollateralization and excess spread providing credit enhancement. For the latter, the transaction has initial credit enhancement of 31.5% on the class A notes.
KBRA noted that LPPT-ST4 uses a sequential pay structure, where the class A notes receive principal payments before the certificates, so that the structure can maintain the required overcollateralization amount. Gross excess spread losses are at about 12.9%, based on a weighted average contract rate of 19.4%, minus a 1.0% servicing fee and an assumed weighted average life adjusted note coupon of 5.5%.
KRBA expresses confidence in LendingPoint’s in-house servicing and collections department, consisting of 199 personnel. The servicing department begins collecting on a loan at one day past due. The company increases collection intensity as it becomes increasingly delinquent.
In what is considered a mixed blessing, from a credit perspective, LendingPoint has a long lead time, 181 days, before charging off overdue loans. This is much longer than the 121 days, which is considered more conservative, but the lender believes the window allows it to recover about 10% more on loans.
