Consumer loan provider Marlette Funding is sponsoring a $303 million securitization of financings originated through its online marketplace-lending platform.
The deal reflects a number of origination and underwriting changes that Marlette had implemented in the last year that resulted in a 9% dip in prime originations, or $1.1 billion, according to a pre-sale report from Kroll Bond Rating Agency.
In other changes to the way Marlette approaches originating the high interest rate loans, the company turned off underperforming lead sources and increased customer interaction in the back end to control risk on funded loans.
Still, some risk lurked in the securitization assets, KBRA said. The rating agency's expected lifetime cumulative net loss for the Marlette Funding Trust 2023-1 is 9.25%, up from 8.45%, in the MFT 2022-3 transaction. Higher note coupons, only partially offset by higher collateral interest rates, have whittled excess spread to 5.44%, from 5.55% seen in MFT 2022-3.
In the previous deal, J.P. Morgan Securities and Goldman Sachs & Co. managed the transaction, according to the Asset Securitization Report deal database.
Yet KBRA did say that initial credit enhancement levels are higher for each note class, and can withstand KBRA's rating stresses.
In terms of pool characteristics, MFT 2023-1 has a balance of $358.3 million as of the cutoff date, among 20,622 loans. On average the loans have a balance of $17,337, and on a weighted average (WA) basis they have a FICO score of 723 and a coupon of 13.82%.
Loans made to borrowers in Texas accounted for 7.34% of the pool, by balance, while California and Florida followed, with 7.28% and 6.95%, respectively.
MFT 2023-1 will issue four classes of notes, which will get credit enhancement from overcollateralization, subordination, a reserve account funded at closing, and excess spread.
KBRA expects to assign 'AAA' ratings to the class A notes; 'AA-' to the class B notes; 'A-' to the class C notes and 'BBB-' to the class D notes. All of the notes have a final scheduled payment date of April 15, 2033.
