SoFi's next consumer loan ABS backed by even safer credits

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SoFi Lending Corp., the online marketplace lender that caters to high-income professionals, is elevating its borrower pool to even greater affluence in a new $499.5 million personal loan securitization.

In the SoFi Consumer Loan Program 2017-4, the San Francisco company is deploying a higher percentage of loans originated from its most elite FICO-score tiers than in its previous three deals this year — as well as the five asset-backed deals for personal loans it collateralized in 2016.

According to a presale report from Kroll Bond Rating Agency, over 45% of the accounts in the pool belong to borrowers with FICO scores above 760, compared to just 36.42% in the trust’s most recent transaction in May. The deal includes an 8.02% slice of loans to consumers whose scores exceed 800, up from 5.74% in the 2017-3 portfolio.

The emphasis on the super-prime echelons, as well as the maintenance of a credit enhancement level of nearly 23%, has earned the SoFi trust a second-straight double-A rating from both Kroll, S&P Global Ratings and DBRS — a level it did not achieve for the senior notes in its first eight consumer loans securitizations.

The 2017-4 transaction includes a $443 million Class A tranche and a $56.5 million Class B series (rated A by Kroll). The 22.69% enhancement for the Class A notes is down slightly from the 22.97% in the 2017-3 deal, due to a lower initial overcollateralization level (12.27%) as well as a slight dip in excess spread to 6.04%.

All of the notes have nine-year maturities, extending two years past the seven-year personal loan terms originated for nearly half (49%) of the 16,915 loans in the pool (the remainder are split between three- and five-year origination terms).

The accumulated principal balance is $569.3 million.

Many other aspects of the 2017-4 collateral differ little from prior transactions, including the average balance of $33,659, a 9.72% weighted average interest rate, and light seasoning of only two months. The average free cash flow from borrowers has declined slightly to $5,063, but the average FICO score has grown to 739 from 733 since May, due to the shift toward higher-score tiers.

The deal itself has a slightly lower cumulative net loss range forecast of 6.85%-8.85% from Kroll, which based its projections on proxy loss data from other marketplace lenders due to SoFi Consumer Loan’s limited performance data.

SoFi grew its business originally with a student-loan refinancing product aimed at high-earning professionals, a program that has yielded 16 securitizations to date. The company also now offers mortgages to the same audience, which has resulted in one securitization.

For personal loans, SoFi has originated more than $5.8 billion for 165,000 borrowers.

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