DBRS Gives Marketplace Lenders High Marks

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After it was announced that new-age student lender Earnest had securitized $112 million worth of notes, another name returned to the forefront, DBRS. Founded in 1976 as Dominion Bond Rating Service, DBRS is a smaller ratings agency than Standard & Poor’s, Moody’s Investors Service and Fitch. Nonetheless, they rated Earnest’s senior notes an “A” which indicates they are of a “good” credit quality.

DBRS is a big name in the marketplace lending industry’s securitizations and they’ve historically doled out optimistic reports. In the case of SoFi for example, several tranches received AAA ratings in 2015, putting them on par with the United States Government in terms of safety.

Below is a list of some of the ratings stamped on new securitizations:

Date Company Amount DBRS Rating
5/28/14 OnDeck $156,680,000 BBB
5/28/14 OnDeck $18,320,000 BB
10/20/14 CAN Capital $171,000,000 A
10/20/14 CAN Capital $20,000,000 BBB
2/10/16 Earnest $34,710,000 A
2/10/16 Earnest $70,240,000 A
2/10/16 Earnest $7,050,000 BBB
11/19/15 SoFi $154,903,000 AAA
11/19/15 SoFi $334,778,000 AAA
11/19/15 SoFi $46,691,000 BBB
8/4/15 SoFi $136,500,000 AAA
8/4/15 SoFi $250,800,000 AAA
8/4/15 SoFi $30,300,000 BBB
6/9/15 SoFi $146,676,000 AA
6/9/15 SoFi $235,445,000 AA
6/9/15 SoFi $29,780,000 BBB
2/3/15 SoFi $151,500,000 AA
2/3/15 SoFi $162,300,000 AA
11/10/14 SoFi $105,700,000 AA
11/10/14 SoFi $197,500,000 AA
7/15/14 SoFi $125,500,000 A
7/15/14 SoFi $125,500,000 A
12/24/13 SoFi $151,800,000 A

In the case of Earnest, the securitized loans represent borrowers with an average FICO score of 775 and an average annual income of $143,535. The average borrower is 32-years old. 81% of them have a graduate level degree.

Since Earnest launched two years ago, they’ve never had a loan go more than 60 days delinquent. That’s out of 5,580 borrowers which represents about $400 million in loans.

“100% of the pool contains refinancings of existing student loan debt,” the DBRS report says. “Loans are used to prepay a borrower’s existing eligible educational loan debt.”

While similar to SoFi’s prime customer base, DBRS explains that among Earnest’s weaknesses are their limited operational history and lack of data to gauge how their loans would perform during a recession.

Last modified: February 17, 2016
Sean Murray

Category: Marketplace Lending

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