A pool of consumer loans, including some extended to borrowers enrolled in debt relief programs, will secure $440 million in asset-backed securities (ABS) that will be issued to noteholders through the Reach ABS Trust 2026-3.
Consumers enrolled in debt relief programs make up borrowers in Reach's Express Settlement Loans program, of E-Loans, while its personal loans are extended to other qualified borrowers not enrolled in its debt relief program, according to Kroll Bond Rating Agency.
As of the transaction's August 31 cutoff date, E-Loans and Personal Loans accounted for 71.9% and 28.1% of the loan balance contributed to the pool, respectively.
Reach 2026-3 will issue the notes through a series of five tranches of class A, B, C, D and E notes, which are all slated to have a legal final maturity date of April 17, 2034, KBRA said. The deal will follow a sequential pay structure, KBRA said.
Other structural cash flow protections include initial overcollateralization (O/C) representing 4.15% of the pool balance at the cutoff date, while the target overcollateralization is either 14.00% of the current pool balance, or 10.50% of the pool balance at its cutoff date, while the O/C floor is 1.00%, KBRA.
The notes benefit from gross excess spread of 14.10%.
Also, the deal benefits from an amortization trigger, KBRA said. If a cumulative net loss ratio amortization event occurs, then Reach 2026-3 will enter full turbo mode, a phase when the transaction will use all available funds to sequentially pay down the outstanding notes.
The underlying pool consists of 30,344 loans with an average balance of $15,128, KBRA said.
On a weighted average (WA) basis, the loans have a collateral interest rate of 21.18%, while the non-zero weighted average FICO score is 597. The largest segment of loans by FICO distribution is the 551 to 600, accounting for 26.97% of the pool.
The underlying loans were recently originated, too, as loans had an original term of 55 months, with an average seasoning of two months, the rating agency said.
In terms of geographic distribution, California, Texas and Florida account for 10.36%, 9.67% and 8.99%, respectively.
KBRA assigns AAA, AA, A-, BBB- and BB to classes A, B, C, D and E, respectively.
