Online lender Social Finance, known as SoFi, is planning its second rated securitization of prime consumer-loan securitization in just over a month.
The SoFi Consumer 2016-2 trust is issuing $480.55 million in asset-backed notes of high-earner loans to mostly advanced-degree professionals that SoFi began originating in 2015. The deal expected to close Aug. 1 – just five weeks after completing a June 27 completion of its $380 million 2016-1 transaction.
The 2016-2 deal is split between a Class A tranche of notes totaling $425.88 million, and Class B notes totaling $54.67 million. The Class A notes have preliminary ‘A’ ratings from both DBRS and Kroll Bond Rating Agency. The Class ‘B’ notes carry ‘BBB’ ratings from both agencies.
The loans are backed by a pool of $575.5 million in personal loans to SoFi’s target consumer base of high-income professionals to which it also markets student-loan refinancing programs. This transaction will be SoFi’s third consumer-loan ABS portfolio, in addition to nine student-loan securitizations the company has issued through trusts since its founding in 2011.
The loans in 2016-2 have an average loan balance of $33,292, a coupon of 8.6%, and an average borrower FICO score of 735. Only 7.08% of the borrowers have credit scores below 700.
The initial overcollateralization of the deal is 16.5%, below that of the 2016-1 transaction's 25% OC level. The loans have an expected cumulative net loss range of 7.15% to 9.15%, according to Kroll estimates.
The latest consumer-loan pool has a few variances in the underlying collateral from 2016-1, according to DBRS. The borrowers in the new pool have slightly higher weighted average free cash flow of $5,031 (vs. $4,973 in last month’s issuance); a higher weighted average borrowing rate of 8.6% as opposed to 8.39%; and the loans have slightly more seasoned loans of seven months, up from five months.
A majority of the loans are with 84-month terms.
Although the target borrower profile is in line with SoFi’s student-loan borrowers, DBRS noted some distinctions. The consumer loan consumer is slightly older (35-50) compared to the student-loan pools (25-40), but with a slightly lower average income of $138,606 vs. salaries between $160,084 and $169,090 for SoFi’s three previous student-loan securitizations.
Most of the consumer loans (87%) are fixed-rate loans.