College Avenue Student Loans, an online student loan refinancing and origination company, has closed its first securitization of private student loans, according to Global Capital. SoFi followed suit, finalizing its fourth securitization.
Getting into the asset-backed securities (ABS) business for the first time, College Ave’s securitization is a $160.89 million offering backed by private student loans. Barclays is the only underwriter on the company’s first ABS transaction.
Credit research and ratings company DBRS has assigned provisional ratings for the various classes of notes issued by College Ave. The Class A-1 notes worth $95,320,000 have been given an A rating, while the Class A-2 notes worth $43,470,000 have also been an A rating. The Class B notes worth $10,760,000 have been given a BBB rating, and, finally, the Class C notes worth $11,340,000 have been given a BB rating, according to DBRS.
According to Global Capital, the weighted average FICO credit score on this securitization is 763, and 12 percent of the borrowers went to a for-profit school. It is expected that not-for-profit educational loans will outperform for-profit school loans. The expected cumulative default rate of the transaction has been set at 14-15 percent.
In comparison to its last securitization, SoFi’s fourth ABS transaction has received much stronger collateral. The average FICO credit score on their fourth securitization has improved from 731 to 738. Further, the percentage of borrowers with an average FICO credit score above 740 has increased to 43.33 percent from 34.92 percent, according to Global Capital.
The list of major banks acting as underwriters on SoFi’s transaction include Deutsche Bank, Citi, Goldman Sachs, and JP Morgan. The online ABS is a $499.5 million deal. Rating agencies S&P, DBRS, and KBRA have all given the securitization early ratings of AA to the $443 million A notes. Each of the rating agencies have assigned an A rating to the B notes worth $56.5 million, according to Global Capital.
SoFi has made headlines recently in regards to their application for an industrial loan charter (ILC) from the Federal Deposit Insurance Corporation (FDIC). The ambitious move by SoFi has been met with much opposition from the Independent Community of Bankers of America (ICBA), an influential lobby group for U.S. banks, who claim SoFi would not be subject to the same kinds of regulations that are reserved for banks.
Other lenders aside from College Ave and SoFi are making similar moves. LendEDU reported yesterday, June 26, that CommonBond closed their fourth securitization transaction. The deal was worth $231 million, its largest to date.
Author: Andrew Rombach
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