Sallie Mae Bank is preparing its first private student loan securitization of the year, according to rating agency reports.
The $551 million SMB Private Education Loan Trust 2016-A is the sponsor’s fifth term ransaction and the fourth transaction in which Sallie Mae Bank will be the servicer.
Fitch Ratings and Moody’s Investors Service expect to assign triple-A ratings to three tranches of senior notes that benefit from 19.6% credit enhancement; they will also assigned A/Aa3 ratings to a junior tranche of notes with 11.6% credit enhancement.
The notes are backed by private student loans originated by Sallie Mae; borrowers in the pool have a weighted average FICO score at origination of 747; 95% of the loans in the pool were made to four-year schools; 92% of the loans in the pool were co-signed. As of March 31, none of the loans were more than 30 days past due or involved in a bankruptcy proceeding.
Compared with recent previous SMB transactions, the 2016-A pool has a slightly higher percentage of loan in repayment status at 63%; however, the FICO score and co-signer percentages have remained over 740 and 90%, respectively. Fitch finds the quality of this pool on an aggregate basis to be largely consistent with those of recent transactions.
Moody’s cited Sallie Mae’s relative lack of servicing experience as a rating concern; it has only been servicing loans since splitting with Navient two years ago and has much smaller servicing size and scale. And until recently, Sallie Mae did not have the capability to collect on defaulted loans; these were sold to third parties at a significant discount. Beginning in November 2015 Sallie Mae began recovering defaulted loans using its own personnel. However they still plan to sell a portion of defaulted loans going forward and may decide to sell defaulted loans or collect on them depending on market conditions.