Loss projections curbed in Marlette's next MPL securitization

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Kroll Bond Rating Agency is projecting lower net losses on Marlette Funding’s next online unsecured consumer-loan securitization pool because of slightly improved credit metrics.

According to a Kroll presale report, online marketplace lender Marlette (which is branded under Best Egg) has a base-case loss range expectation of 6.85%-8.85% for the forthcoming $339.25 million Marlette Funding Trust 2019-3, the fintech’s 12th securitization.

That is below the 6.9%-8.9% range for Marlette’s previous deal, in April.

The new transaction has a slightly lower average loan balance of $11,956 (compared to $13,455), higher seasoning of six months compared to three months, and a higher collateral interest rate at 12.82% versus 12.69%.

The WA FICO in the next deal is 716, unchanged from Marlette’s prior transaction.

Kroll is issuing preliminary AA ratings to the $279.8 million Class A notes in the transaction, an A rating to the $27.9 million Class B tranche and BBB- to the $31.5 million in Class C notes. Kroll assigned similar ratings to the $329 million Marlette Funding (MFT) 2019-2.

Initial credit enhancement for the senior AA-rated notes has decreased slightly to 25.8% from 26.2% in MFT 2019-2.

In April, Marlette added nonprime (or high-yield prime) originations for the first time to one of its securitizations. Those loans were launched in May 2017 to widen the credit spectrum of borrowers that take out higher-yielding loans with shorter durations. A typical high-yield prime borrower has a FICO of 679, according to Kroll.

Marlette, based in Wilmington, Del., issues loans that are underwritten by partner Cross River Bank, a New Jersey-chartered commercial bank. Marlette’s loans are exclusively funded and held by institutional investors, and a portion of the assets retained by Marlette and Cross River.

While Cross River maintains oversight of the Best Egg lending platform, the loan servicing and sales is outsourced by Marlette. But Marlette is preparing a conversion to in-house servicing in the third quarter.

The first quarter loan volume of $568 million was a 39% year-over-year increase in three-month issuance compared to 2018. Over the past year, Marlette has originated between $400 million and $720 million in new loans have been originated per quarter.

The company’s $270 million of multi-year warehouse facilities were temporarily upsized to give Marlette $345 million in warehouse capacity until July 2019, according to Kroll.

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