Upstart Network is returning to market another series of asset-backed notes issued off of a much smaller pool of unsecured consumer loans extended to customers with notably higher credit scores than its previous offering, raising about $174 million from the market in the process.
Many details about the current deal look similar to the previous transaction, with Goldman Sachs serving as lead underwriter and the collateral consisting of loans originated by Cross River Bank in New Jersey, FinWise Bank in Utah. Upstart Securitization Trust, 2023-2, however, has 13,266 underlying loan contracts in its collateral pool, compared with 36,509 in UPST 2023-1, according to ratings analysts at Moody's Investors Service.
On a weighed average (WA) basis, the obligors have a FICO score of 686, some 23 points higher than the FICO score on the UPST 2023-1. Borrower interest rates increased from 19.22% on the previous deal to 21.75% on UPST 2023-2%, according to Moody's. Also, the distribution of loans by original terms was more concentrated in the middle band of 60 months, with 92.4%, up from 86.9% on the previous deal. Concentrations of 36-month terms dropped to 7.6%, from 11.9% and 84-month term loans virtually disappeared, dropping to 0.0% from 1.1%, according to the rating agency.
Other important aspect of the deal remained the same, according to Moody's such as California accounting for the highest geographical concentration of borrowers, 13.8%.
Although the Upstart Network does include loans originated by Customers Bank in Pennsylvania, the Upstart securitizations have never included those in the securitization pool. Kroll Bond Rating Agency noted that no Customers-originated loans were in the UPST 2023-2 pool, but Customers loans are eligible for inclusion during the pre-funding period that ends 60 days after the deal's closing date.
A reserve account, overcollateralization, excess spread and subordination provide credit enhancement to the deal, while a cash reserve provides liquidity.
KBRA expects to assign ratings of 'A-' to the $109.1 million, class A notes; 'BBB-' to the class B notes; and 'BB-' to the class C notes. Moody's, for its part, says it expects to assign ratings of 'A1' to the class A notes; and 'Baa2' to the class B notes.
The notes have a legal final maturity of June 20, 2033.
