A year ago, SoFi Lending Corp. expanded its product lineup beyond student refinance loans to include consumer loans.
Now it’s bundling these consumer loans into collateral for bonds, just as it does with its student loans.
This week the company launched SoFi Consumer Loan Program 2016-1, its first such transaction with a credit rating. The securitization trust will issue a single, $379.8 million tranche of notes with a legal final maturity of 2025. They benefit from 25% credit enhancement and have a preliminary ‘A’ rating from Kroll Bond Rating Agency.
SoFi has completed one other consumer loan securitization, for $189.37 million, in August 2015, but that deal was unrated. It has also done nine rated student loan securitizations.
SCLP 2016-1 is backed by loans with terms of 36, 60 and 84 months, according to KBRA.
The weighted average original loan term of the loans is higher than that of the marketplace lending peers, which KBRA says makes the transaction exposed more to credit risk borne by economic volatility. Approximately 56.3% of the loans have 84-month terms, and the weighted average term is approximately 70 months. By comparison, its peers who lend to prime borrowers generally make loans with weighted average term ranging from 44 to 48 months.
However, SoFi generally makes longer loans to more creditworthy obligors than its peers and the longer term allows for manageable payment sizes, according to KBRA. The weighted average credit score and net interest rate of borrowers in this deal are 736 and 8.39% respectively.
The loan pool is also geographically diverse, with the top three states based on current balance (CA, TX & NY) representing about 30% of the portfolio. The loans pool is seasoned by five months and no loans are more than 30 days delinquent.
SoFi’s underwriting model is based on the borrower’s free cash flow, ability to repay, credit history, and work experience and requires 100% income verification on all borrowers and products. The original principal balances ranging in size from $5,000 to $100,000.
The company has separate funding facilities for student loans and for mortgages, which it also started originating last year. To date, the company has not brought a rated mortgage securitization to market.
As of March 31, 2016, SoFi had originated approximately $2.2 billion in personal loans to roughly 57,000 different prime quality borrowers.
