SoFi, Navient kick off second quarter student loan ABS issuance

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Navient and Social Finance are kicking off what’s expected to be a busy second half for student loan securitization with two deals totaling nearly $1.5 billion.

The $551 million SoFi Professional Loan Program 2017-D LLC (SoFi 2017-D) is backed by private loans used to refinance the debt of borrowers who have already graduated and have high paying jobs.

Approximately 21.9% of the SoFi 2017-D graduate school borrowers have a medical degree (including dental) and have a weighted average income of $265,644, 12.1% have graduated from law school and have a weighted average income of $178,210 and 10.9% hold an MBA degree and have a weighted average income of approximately $147,371.

The borrowers underlying SoFi 2017-D have earn $14,437 less than SoFi 2017-C borrowers and have $557 less monthly free cash flow.

The fixed-rate Class A-1FX Notes and Class A-2FX Notes and the Class B-FX Notes (Class B Notes) will be secured by a group of fixed-rate Refinancing Loans.

Credit enhancement for SoFi 2017-D will consist of overcollateralization, a reserve account for the Class A Notes, a liquidity account for the Class B Notes, subordination provided by the Class B Notes for the benefit of the Class A Notes and excess spread.

SoFI continues to dominate the student loan refinance sector, accounting for 67% of total issuance by dollar volume as of the end of the second quarter, according to DBRS. Since 2013, it has completed 16 securitizations.

Navient’s $995 million offering is backed entirely by loans made through the Federally Family Education Loan Program, which are at least 97% guaranteed by the U.S. Department of Education.

Approximately 45.1% are consolidation loans, 50.2% are Stafford loans, 4.7% are PLUS loans, according to Moody’s Investors Service. The average outstanding principal balance per borrower is $15,680, the weighted average borrower interest rate is 5.63%, and the weighted average remaining term to maturity is 155 months.

Repayment of FFELP loans has slowed considerably under generous income based (IBR) repayment programs introduced several years ago.

Additionally, 20% of the loan pool were once delinquent but are now making timely payments. So-called rehabilitated FFELP loans benefit from the same degree of federal guarantee, they are expected to default at a significantly higher rate than loans that have always been current.

Moody’s expects cumulative net losses for this transaction to be 0.92%, slightly less than 1% for Navient’s previous transaction backed by a mix of rehabbed and non-rehabbed FFELP

The two deals follow a strong first half, when new issuance reached $7.9 billion, up 11% over the same period of 2016, according to DBRS. In its quarterly report on the student loan sector, the rating agency attributed the increase to “strong overall economic conditions and sentiment within the broader ABS market, which has contributed to high demand for ABS bonds from all asset classes.”

Navient issued the three largest transactions (all FFELP) in 2017 to date, totaling $2.9 billion of rated notes. Sallie Mae Bank issued a private student loan transaction totaling $772 million. SoFi issued three refi transactions so far in 2017, totaling $1.6 billion of rated notes. There were two other FFELP transactions — one issued by Nelnet, totaling $535 million and another by ECMC Group totaling $409 million. Darien Rowayton Bank, CommonBond, and Earnest Operations each issued one refi transaction, totaling $308 million, $232 million and $175 million, respectively.

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