SoFi Lending Corp., which helped pioneer student loan refinancing for well-educated high earners, is preparing its first securitization of residential mortgages.
As you might expect, given the company's client base among young professionals, the credit quality of the borrowers is high, even by the standards of recent prime jumbo deals. It also features an unusually high concentration of loans backed by property in California.
The $169.79 million SoFi Mortgage Trust Series (SFMTS) 2016-1 will issue four classes of super senior notes, and two tranches of senior notes, secured by 15- and 30-year fixed rate home loans that the San Francisco-based lender began underwriting in late 2014.
Fitch Ratings, DBRS and Kroll Bond Rating Agency have all assigned triple-A ratings to the notes, which are backed by 270 super-sized mortgages that SoFi has originated primarily to wealthy homeowners in California.
Most private-label mortgage bonds have heavy exposure to the Golden State, one of the highest-cost U.S. housing markets. But SoFi has established marketing relationships with several Silicon Valley employers. As a result, 78% of the properties in the pool are located in the state,43.8% of them in San Francisco alone. And while, San Francisco has a diverse economy, which helps mitigate the risk of borrowers in any one sector losing their jobs, 14% of the borrowers in the pool are tied to a single unnamed employer. Another 10% are employees of Google.
Still, according to Kroll, the credit quality of SFMTS 2016-1 is one of the “most favorable” among any of 63 rated prime RMBS deals since 2012 – has the second-lowest weighted average loan-to-value ratio (56.4%) and lowest WA combined LTV (57%) among those deals.
The average credit score of 777 is the second-highest, KBRA noted, with borrowers bringing an average annual income of $333,307 and liquid reserves of $225,960 to the table (along with average free monthly cash flow of $12,878).
The 25.3% weighted average debt-to-income ratio is also a low figure in the prime jumbo RMBS universe.
Social Finance first tapped the asset-backed market last year with bonds secured by loans refinancing the student debt of a well-to-do base of doctors, dentists, lawyers and business executives. The company has completed five deals in 2016, and 12 overall, on its SoFI professional loan ABS platform.
The company has completed five transactions of student loan refis in 2016, and pools consumer loans it also underwrites to individuals with slightly lower credit scores and incomes than its typical student-loan profile. SoFi has also marketed five such personal loan backed-deals in 2016.
SoFi is also teaming with Fannie Mae a student loan rate-and-term refi program tied to a home-equity line of credit, underwritten to Fannie’s credit-scoring guidelines.