Student loan ABS

Deals, trends and research in structured finance and asset-backed securities for the week of Feb. 26-March 4

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.

The student-loan servicer is marketing bonds secured by refinance originations of its Earnest subsidiary targeting borrowers in advanced-degree professions.

The fixed-rate loans from Earnest involve refinancings to advanced degree professionals who have greater financial means to make payments despite the economic disruption caused by the COVID-19 pandemic.

A new CommonBond private student-loan securitization is expected to generate slightly higher losses than the Goldman Sachs-owned lender’s previous transaction of refinanced loans of professional-degreed borrowers.

Unlike other asset-backed issuers in the auto or mortgage sector, SoFi was able to market SoFi Professional Loan Program 2020-C Trust without additional investor protections above what it offered in deals closed before the COVID-19 outbreak.

Nelnet Student Loan Trust 2020-2, arranged by Bank of Montreal, is made up of nearly 50% of formerly delinquent loans that have been cured to current status.

SoFi Professional Loan Program 2020-B Trust is a $1.06 billion asset-backed offering of bonds secured by a pool of loans made to advanced-degree graduates of medical, dental or legal universities, or MBA recipients.

Upstart is disputing an analysis accusing it of discriminating against prospective borrowers based on the college they attended, saying it contains “inaccuracies and misunderstandings.”

Sallie's first student-loan securitization of the year comes a week after SLM Corp. announced plans to sell more loans from its portfolio to fund a share buyback program.

Macro factors point to a solid year in the securitization market but wild cards abound, many of them political.