For the first time, Social Finance (SoFi) has hired Moody’s Investors Service to rate one of its securitizations of student loans, the lender's third such deal.
SoFi Professional Loan Program 2014-B consists of $303.2 million in securities backed by private student loans that the lender itself originated.
The rating agency said in presale that it plans to assign an A2’ rating to the three-year class A-1 and A-2 notes.
DBRS is also rating the deal, having given a preliminary 'AA' rating to the class A1 and A2 notes, according to a release. DBRS rated its first two transactions. On the second deal, 2014-A, it was joined by Standard & Poor's.
SoFi is a nonbank lender whose borrowers are either enrolled in, or have graduated, from business, law, medical and other professional schools. While it started as a P2P company, acting as a platform between alumni lenders and the borrowers, SoFi is now primarily funded by institutional investors.
SoFi originated all of the loans in the 2014-B pool; 99.5% are refinancing loans, primarily to borrowers who were out of graduation school and had outstanding loans.
Borrowers refinancing with SoFi have been making principal and interest payments for some time and are less likely to default than student loans that are just entering repayment.
The borrowers in SoFi 2014-B have made a weighted average of 23 student loan payments before refinancing into SoFi loans. The remaining 0.5% of the loan pool in SoFi 2014-B consists of in-school loans, which borrowers use to finance the costs of attending approved educational institutions.
The collateral in SoFi's deals stack up better than other private student loans. For example almost all of SoFi 2014- B’s borrowers are employed and the borrowers are more established in their careers than typical borrowers of private student loans.
The SoFi 2014-B loan pool has a weighted-average, remaining term of 115 months, compared with terms of 180 to 300 months for most other private student loan pools. SoFi’s refinancing loans enter repayment immediately after origination therefore the loans amortize from the beginning of the transaction. In contrast, other PSL deals contain in-school loans that borrowers may defer for several years.
The weighted average credit score for borrowers of SoFi 2014-B is 779, compared with 776 for SoFi 2014-A. In a typical recent PSL transaction the weighted-average FICO is above 730.