SoFi Lending Corp. is marketing its third securitization of the year of loans refinancing the student debt of high earning professionals, as it continues to accelerate the pace of lending.
SoFi Professional Loan Program 2017-C will issue $560.8 million of bonds backed by $599.76 million in fixed- and floating-rate loans originated to select medical, legal and business professionals. The deal comes just two months after the $500 million 2017-B transaction, and puts the company on target to surpass last year’s pace. The sponsor’s third deal (among five eventual offerings) of 2016 didn’t appear until late July.
Bond rating agencies DBRS and S&P Global Ratings both expect to assign triple-A ratings to three classes of fixed- and floating-rate notes to be issued in the latest transaction, SoFi’s 16th term securitization overall. These notes benefit from credit enhancement of 16.52%, including overcollateralization, subordination, separate reserve accounts for the A-1 and A-2 notes. There are separate liquidity accounts for the Class B and C notes as well.
The A-2 series is further divided into a “front-pay” and “back-pay” structure in which principal payments will not apply to $175.7 million in A-2B notes until the $230.2 million A-2A notes are fully paid off. The deal also includes a full turbo feature where remaining available funds will pay the principal on Class A notes.
All of the notes have a final maturity of 2040.
The 2017-C deal is secured by $599.76 million in remaining loan balances of the collateral pool. SoFi divides the senior notes into a floating-rate $96 million Class A-1 tranche (benchmarked to the one-month Libor) that contains the variable-rate refi loans; and into two tranches of fixed-rate A-2 notes backed by the fixed-rate loans.
This transaction features underlying borrowers with comparable high incomes (an average of $172,155), FICO scores of 770 and monthly free cash flow ($7,296) that is similar to SoFi’s recent student loan securitizations.
The weighted average default rate of 4.03% of SoFi’s managed student loan portfolio is lower than the typical default rate for private four-year institutions (6.5%). As of March, the company's origination levels had reached $10.9 billion, involving approximately 140,000 different borrowers. Only 269 of those loans have ever been more than 60 days delinquent, according to DBRS.
The loans are serviced by The Higher Education Loan Authority of the State of Missouri.