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Navient forbearance rates decline in latest refi SLABS deal

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Navient Solutions is reducing the forbearance rate in its portfolio refinanced private student loans, which had increased in the months following the cornonavirus outbreak.

But as evidenced by its latest securitization of originations by its Earnest affiliate, the rate still remains far above what is normally a miniscule figure for Navient’s trust collateral culled from online loan refis for high-earning professionals in the medical and legal field.

According to ratings agency presale reports, the $786.4 million Navient Private Education Refi Loan Trust 2020-G has a forbearance rate of 3.41% of the loan pool by outstanding balance, involving loans that have been granted temporary forbearance due to economic strains on borrowers rooted in the impact of COVID-19.

That is down from the 3.9% forbearance rates for two prior transactions issued in May and June, but near the 3.3% rate from Navient’s deal in April that priced after the onset of the pandemic. But April’s figure had increased from a level that had been steadily under 1% since Navient began sponsoring private SLABS offerings featuring loans from Earnest, which it acquired in 2017.

Navient initiated its coronavirus disaster forbearance program in March, offering a three-month deferment of payments through June 2020 for borrowers who had suffered as a result of business closings or shutdowns introduced to curtail the spread of COVID-19. That brought an immediate spike of loans in forbearance to 9.9% in May 2020.

Borrowers that enrolled in additional forbearance stood at 8.3% this month, while 0.8% became delinquent. Approximately 90.8% of Earnest-originated loans are now in current repayment status, according to ratings agency reports.

The new transaction, representing the 58thoverall private education loan securitization sponsored by Navient (which spun out of the former Sallie Mae Corp. in 2014), features two classes of notes. A $729.9 million Class A tranche benefiting from 9.5% credit enhancement has preliminary AAA ratings from DBRS Morningstar, Fitch Ratings and S&P Global Ratings.

DBRS Morningstar also rates a $56.5 million Class B tranche at AA.

The portfolio of 10,974 loans in the deal has a weighted average balance of $73,498, with three-month seasoning (all the loans were originated in 2019 and 2020). The pool has a WA original borrower FICO score of 764, with an average borrower income of $141,381 and average monthly borrower cash flow of $4,610.

Approximately 63.6% of the pool (by outstanding principal balance) consists of loans made to borrowers that obtained a graduate degree; 42.4% have a medical degree.

JPMorgan is the lead underwriter on the deal, with Barclays, BofA Securities Inc., RBC and Credit Suisse also participating in the deal.

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Student loan ABS Earnest Navient Coronavirus ABS