Student loan servicer Navient is marketing another $497 million of securities backed by federally guaranteed student loans, according to rating agency reports.    

Navient Student Loan Trust 2016-2 pools Federal Family Education Loan Program (FFELP) loans with a total outstanding balance of $510.25 million and includes a 20% slice of previous defaulted loans that have entered rehabilitation. The trust will issue three tranches of class A notes, each of which has received preliminary triple-A ratings from both Fitch Ratings and Moody’s Investors Service.

The $153 million Class A-1 notes tranche, the Class A-2 notes totaling $102 million and a Class A-3 tranche totaling $240 million, pay floating rates of interest and benefit from 3.8% (or $19.6 million) of credit enhancement. The transaction is expected to close April 14.

The deal is Navient’s second student loan securitization of the year. It follows a $1.08 billion 2016-1 deal completed in February backed by consolidated loan originations.

The new trust will include a reserve account totaling 1.25% of the initial pool balance and will be funded at closing.

The pool size of $510.2 million in loans from 41,156 borrowers (covering 90,581 loans) is smaller than each of Navient’s three 2015 portfolios of consolidated, non-consolidated and rehab student loans, including the 2015-3 trust that securitized $752.6 million in loans among 49,363 borrowers.

In the pool, 9.33% of the loans are in deferment and 16.81% are in forbearance. The weighted average interest for loans in the trust is 5.01% and the average borrowings are $12,398. More than 52% of the loans were originated prior to July 1, 2006.

The share of 20% rehab loans in the pool is in line with the 2015-3 collateralization, but exceeds that of the prior 2015 portfolios issued by Navient. Rehab loans are previously defaulted loans that have regained their current status through nine timely payments in a 10-month period.

Although the loans carry a higher risk, they nonetheless carry the same government guarantee as non-rehab FFELP loans.

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