Social Finance’s second securitization of “peer-to-peer” student loans, SoFi Professional Loan Program 2014-A, has been assigned a preliminary A’ ratings by DBRS.
This time the trust will issue two classes of notes, instead of a single tranche. The A’ rated, class A1 notes are being talked at 115 to 160 basis points over Libor. By contrast, the previous deal, completed in December 2013, was talked in the 220 to 230 basis point area. The class A-2, A’ notes of the latest deal are being talked at swaps plus 165 basis points.
SoFi, as the firm is known, is a nonbank lender whose borrowers are either enrolled in, or have graduated, from business, law, medical and other professional schools.
SoFi’s deal is backed by loans originated through its “refinance” and “in-school” loan programs. Refinancing Loans are used to prepay a borrower’s existing eligible educational loan debt. Borrowers under this program 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 that are included in the securitized pool have already obtained employment; have a weighted average borrower income of $140,209 and have unblemished credit scores with a weighted average FICO of 776.
Although the overall credit quality of the SoFi 2014-A pool is stronger than that of SoFi 2013-A, the quality of schools that SoFi 2014-A borrowers has weakened as the issuer expands the list of eligible schools for its growing refinancing program. DBRS measure the quality of the school attended according to the Department of Education’s school-specific three-year cohort default rates.