SoFi consumer-loan ABS pool shifts toward shorter-term loans

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Social Finance is supplying lower levels of credit enhancement to its third consumer-loan securitization of 2019, with a shift toward more short-term loans compared to its first two pools this year.

The $549.2 million SoFi Consumer Loan Program Trust (SCLP) 2019-3 issuance has a collateral pool of approximately $600.4 million in consumer loan balances from the accounts of high-earning borrowers.

The initial credit enhancement level of 30.46% for the $420 million in Class A notes is down slightly from SoFi’s previous transactions this year (31.46% and 33.45% for SCLP 2019-2 and 2019-1, respectively).

The lower CE levels are consistent with slightly stronger credit characteristics than the earlier deals, including a larger percentage of less-risky short-term loans (24- and 36-month) making up 18.46% of the pool, up from 16.12% in SCLP 2019-2.

Longer-term loans of 72-84 months have shrank to 20.77% of the pool from 28.45%, according to presale reports.

Borrowers with FICOs over 740 increased to 62.44% from 61.26%, as well.

The CE support will expand as the deal amortizes, however, with a target overcollateralization level growing to 11% from the initial 8.47% level.

The Class A notes have early AAA ratings from Kroll Bond Rating Agency, DBRS and S&P Global Ratings. (SoFi’s consumer loan ABS transactions have been rated with senior-note triple-A ratings since last year by both firms.)

The Class B notes are sized at $31.1 million, with an AA+ from Kroll and AA from S&P. The $62.5 million in Class C notes have an A+/A rating from the agencies, while the $35.6 million in Class D notes is rated solely by Kroll (BBB+).

Kroll has a projected net loss range of 5.65%-7.65% for the 2019-3 pool. The agency noted higher 60-plus day delinquencies in 2016 and 2017 vintage ABS pools from SoFi, but says that is in line with the overall consumer lending sector. Nevertheless, the agency increased loss expectations in January for the SCLP 2017-1, SCLP 2017-3 and SCLP 2017-4 pools above Kroll’s original estimates.

S&P itself has an expected default rate of 8% on the transaction, down from 8.3% on default projections its analysts made for SCLP 2019-2.

SoFi’s personal loans range from two to seven years (with seven-year loans making up 16.34% of the collateral), and are targeted at high-earning borrowers with weighted average annual incomes of $155,896 and FICO scores of 755 in the 2019-3 pool. The WA monthly free cash flow for borrowers is $5,789.

The average loan amount per borrower is $32,265, consistent with prior pools.

SoFi’s two previous transactions pooled a combined $1.2 billion. Last year the San Francisco company securitized about $2.7 billion in consumer loans.

SoFi has originated $14.7 billion in personal loans to 381,000 prime quality borrowers. As of March 31, it had $2.9 billion of multiyear funding capacity from nine warehouse lenders for its consumer loan program.

SCLP 2019-3 is SoFi’s 19th unsecured consumer loan transaction. It has also issued 25 securitizations for its signature student-loan refinancing program as well as one deal backed by its new mortgage origination platform.

The deal is expected to close June 7.

Morgan Stanley, Citigroup, Deutsche Bank, Goldman Sachs, RBC Capital Markets and Allen & Co. are the underwriters on the transaction.

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