Student loan ABS

Moody's Investors Service says forbearance levels were a factor in assigning a higher expected net loss figure for Navient's new FFELP securitization.

The third-quarter forbearance rate of the refinanced private student loans fell to 2.58% from the 8.36% average during the second quarter of the year – which is an approximate 70% decline.

The third offering of bonds secured by non-guaranteed private student loans has a senior-note weighted average life of just 3.44 years, compared to over five years each for two prior Navient SLABS deals this year.

Educational Credit Management Corp. is issuing its third securitization since the start of the pandemic that is collateralized entirely by Federal Family Education Loan Program rehabilitated loans but still carries a negative outlook from Fitch Ratings.

Navient Solutions has approached the market with $780 million securitization of Federal Family Education Loan Program loans, following a similarly structured transaction completed in early August. In a report published Oct. 12, Moody's Investors Service highlighted the elevated risk to those assets during the current pandemic.

Investors continued to tap the COVID-19-driven emergency facility for SBA loan pool purchases, secondary CMBS notes, and private SLABS.

The loans, which are not federally guaranteed, are refinancings of student-loan debt held by prime borrowers primarily with advanced medical degrees.

Although the 3.41% forbearance rate is down from two prior Navient refi deals, it remains far above what has been the low historical payment deferral and workout rate for its refinancing program for advanced-degree professionals.

The action, affecting 362 tranches totaling $57 billion, is taken a week after Fitch revised the U.S. sovereign rating to negative because of ongoing deterioration in public finances.

Student loan servicing giants, Sallie Mae Bank and its offshoot Navient Solutions, are each approaching the market with deals securitizing students loans, providing investors with exposure to different types of loans and deal risks.