SoFi's Debut Prime Jumbo RMBS Is Big Play on Silicon Valley

SoFi Lending Corp.'s securitization of its student loan refis for high net worth individuals is now a model for its recent expansion into super prime jumbo mortgages.

SoFi has launched a $169.8 million bond issuance backed by 270 super-sized mortgages that SoFi has originated primarily to wealthy homeowners in California.

SoFi Mortgage Trust Series 2016-1 will issue four classes of super senior notes, and two tranches of supportive senior notes, secured by 15- and 30-year fixed rate home loans that the San Francisco-based lender began underwriting in late 2014.

The senior notes have preliminary AAA ratings from Fitch Ratings, DBRS and Kroll Bond Rating Agency.

The transaction is smaller than many prime jumbo mortgage securitizations, but the collateral is also less risky than many rated by either KBRA or Fitch.

According to Kroll, the credit quality of SFMTS 2016-1 is one of the "most favorable" among any of 63 rated prime RMBS deals since 2012 and has the second-lowest weighted average loan-to-value ratio (56.4%) and lowest weighted average combined LTV (57%) among those deals.

The average credit score of 777 is the second-highest, KBRA noted, with borrowers bringing an average annual income of $333,307 and liquid reserves of $225,960 to the table (along with average free monthly cash flow of $12,878).

The 25.3% weighted average debt-to-income ratio is also a low figure in the prime jumbo RMBS universe.

KBRA did express concerns of the deal's concentration levels in California (78% of the properties in the pool), and in San Francisco alone (43.8%). In addition, 14% of the borrowers in the pool are tied to a single unnamed employer; another 10% are employees of Google, among Silicon Valley employers that SoFi has established a marketing relationship to offer loan products.

Social Finance first tapped the asset-backed market last year with bonds secured by loans refinancing the student debt of a well-to-do base of doctors, dentists, lawyers and business executives. The company has completed five deals in 2016, and 12 overall, on its SoFI professional loan ABS platform.

The company has completed five transactions of student loan refis in 2016, and pools consumer loans it also underwrites to individuals with slightly lower credit scores and incomes than its typical student-loan profile. SoFi has also marketed five such personal loan backed-deals in 2016.

SoFi is also teaming with Fannie Mae a student loan rate-and-term refi program tied to a home equity line of credit, underwritten to Fannie's credit-scoring guidelines.

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