SoFi Lending, the marketplace lender that specializes in refinancing student loans to borrowers in post-graduate medical, legal and professional fields, has baked some additional investor protections into its latest securitization.
SoFi Professional Loan Program 2016-B LLC will issue a total of $380 million of bonds, including three tranches of senior notes with preliminary AAA ratings from DBRS and a subordinate tranche rated A.
The variable-rate class A-1 notes will be primarily secured by a group of variable-rate loans; the fixed-rate class A-2A notes and class A-2B notes will be primarily secured by a group of fixed-rate loans. The class B notes will be secured by both the variable-rate and fixed-rate loans.
Unlike previous SoFi securitizations, SoFi 2016-B is a sequential pay structure whereby no principal will be allocated to the subordinate class of notes until the senior notes are paid in full.
In addition, one of the senior tranches, the class A-2B notes, will not receive any principal until the class A-2A notes are paid in full. Because they will be outstanding longer, the class A-2B notes are exposed to more credit risk, thought they carry the same credit rating.
The collateral backing the notes is similar to that of previous deals. The portfolio contains a weighted average FICO score of 767. Additionally, the student loans have a weighted average borrower income of $166,764 and a weighted average borrower monthly free cash flow, after expenses, of $7,062.2
The Higher Education Loan Authority of the State of Missouri is the deal’s servicer.
The Massachusetts Education Financing Authority is also queuing up $340 million of student loan backed securities.
The J Series 2016 consists of a single tranche of notes rated A by Fitch Ratings and AA by Standard & Poor’s. The final maturity has yet to be determined.
Proceeds will be used to originate $187 million of loans over the next year and to purchase another $171 million of loans currently used as collateral in other deals that the MEFA plans to wind down. The loans to be transferred were originated between 2001 and 2009 under different underwriting standards; $49.1 million of them pay variable interest rates and amortize over 15- and 20-year terms.
About 48% of the loans made by the authority since 2011 are either interest-only or immediate-repayment obligations, whereby the loan payment begins upon disbursement, while the student is in school. By comparison, traditional student loans defer payments until after students leave school. These loans generally have lower interest rates than the deferred loans; S&P believes that, all else being equal, they should perform better than deferred loans.
Xerox Education Services is the servicer; the underwriters are RBC Capital Markets, J.P. Morgan Securities, and Bank of America Merrill Lynch.