It’s an indication of the buzz surrounding marketplace lending that even securitization trustees are touting their expertise in this new but fast-growing asset class.
BNY Mellon said Thursday that its corporate trust business has already participated in as many securitizations of marketplace loans in the first quarter of 2015 as it did for all of 2014.
From January through March, it received a mandate on five programs totaling $1.1 billion. By comparison, it participated in two transactions in 2014 totaling $500 million.
Another six programs totaling $1.1 billion are in various stage of negotiation; the firm expects to participate in as many as eight transactions totaling $1.5 billion in the second half of the year.
Marketplace lending, also called peer-to-peer lending, refers to online lending platforms that connect prospective borrowers to interested lenders, typically in market segments that are underserved by traditional banks. With institutional capital now flowing into the space, securitization of these loans has grown, along with the need to administer the new securities.
Orchard Platform estimates that these platforms collectively made about $9 billion of loans in the U.S. this year; it’s projecting about $25 billion in lending for 2015.
“We expect to see continued gains in the second quarter, as we carry on discussions with existing and potential new clients about additional securitizations,” said Jim Maitland, executive vice president of corporate trust at BNY Mellon, said in a press release.
“BNY Mellon’s Corporate Trust group has a long history of providing critical value-added services to the financial intermediaries arranging collateralized transactions,” Maitland said. “These services are now extending beyond the boundaries of traditional banking to include financial instruments securitized in marketplace lending.”
The services that BNY Mellon provides during the pre-securitization phase include loan verification, custodial services and master servicing. Following market issuance, BNY Mellon serves as trustee and paying agent, processing interest and principal payments to investors.