PeerIQ’s Marketplace Lending Securitization Tracker Q4 2016

PeerIQ’s Marketplace Lending Securitization Tracker Q4 2016

Executive Summary Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.4 Bn this quarter with cumulative issuance now totaling $15.1 Bn. YTD issuance of the sector stands at $7.8 Bn as compared to $4.9 Bn from prior year, a 59% increase. Although MPL origination volumes have declined at some […]

PeerIQ’s Marketplace Lending Securitization Tracker Q4 2016

Executive Summary

Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.4 Bn this quarter with cumulative issuance now totaling $15.1 Bn. YTD issuance of the sector stands at $7.8 Bn as compared to $4.9 Bn from prior year, a 59% increase.

Although MPL origination volumes have declined at some platforms, the percentage of loans funded through ABS is at a record high of 70%.

The movement towards rated securitizations at larger transaction sizes continues. Further, the growth in average deal size continued, growing to $252 Mn in 2016 as compared to $35 Mn in 2013.

New issuance spreads continued to tighten in—a credit friendly environment for securitization. In 2016, we saw moderate spread compression across senior classes, indicating stable investor appetite for MPL ABS paper in the market.

We estimate $6.3 Bn to $11.2 Bn MPL ABS issuance for 2017. Goldman Sachs, Morgan Stanley, and Citi take top positions on the league tables.

Ratings agencies grow increasingly comfortable with assessing MPL risk. Kroll provided the first rating for a securitization of Madden-Midland loans. DBRS tops the league tables in ratings activity.

We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that can sustain low-cost capital access, build investor confidence via 3rd party tools, and embed strong risk management frameworks will grow and take market share.

Authors:

Wilfred Daye wilfred@peeriq.com

Jianguo Xiao jianguo@peeriq.com

Yishu Song yishu@peeriq.com

Investors should consider PeerIQ as only a single factor in making their investment decision. Please refer to the Disclosure Section, located at the end of this report, for information on disclaimers and disclosures.

Introduction

Marketplace Lending ABS Trends

The fourth quarter of 2016 saw steady growth in MPL securitization. Ten deals priced, totaling $2.4 Bn, another quarter of strong quarterly issuance. Total issuance for 2016 reached $7.8 Bn, as compared to $4.9 Bn for 2015 (59% YOY growth). This growth now brings the total size of MPL securitization issuance volume to date to $15.1 Bn.

Although we continue to see differentiation in credit performance and execution across issuers, overall, investor sentiment has improved dramatically versus a year ago. Spreads on new issue senior consumer MPL ABS have tightened 50% for 2016; and the demand for paper across the capital structure has been over-subscribed for new issuance deals.

The market continued to move towards larger deals with repeat issuers. Further, new issuance pricing spreads tightened, in line with other securitized products, although MPL bonds continue to offer attractive relative value for comparable duration and rated products.

All variations of originators—(i) balance-sheet, (ii) pure marketplace lenders, and (iii) hybrids—have established programs to tap into the ABS markets in 2016. In July, Marlette issued its first unsecured consumer loan MPL ABS deal from its new shelf (MFT). Lending Club introduced the first deal on its branded shelf (LCIT), suggesting a pattern of repeat standardized issuance. Looking ahead in Q1 2017, Upstart and Prosper reportedly intend to inaugurate a securitization program.

Further, SoFi, the largest MPL issuer, has emerged as a model for successful repeat issuance, enjoying a 70 to 110 bps funding cost advantage in senior ABS pricing versus its peers in the student lending category.

Macro Conditions

In a widely expected move, on December 14th, FOMC officials increased the Fed Funds rate by 25 basis points to a target range of between 50 and 75 basis points. The Fed is taking an increasingly hawkish stance due to an improving growth outlook (3.5% annualized growth in Q3), tightening labor market (4.6% unemployment, a nine-year low), and wage growth (91-month high). The ten-year inflation bonds traded at ~2% breakeven rate at the year-end 2016. Further, consumer confidence in the economy is at its highest level since August 2001.

A strong “risk-on” environment has prevailed since the US election. Treasuries have sold off and equity markets haverallied on higher growth and inflation expectations. The UST 10-year bond yield of 2.4% is up a whopping 54 bps since Election Day. Equity markets have rallied and the S&P 500 increased 6.4% post-election.

For 4Q16, overall credit markets have exhibited low volatility and credit conditions remain relatively benign. For instance, implied volatility on 3-month CDX HY options stayed at their historical low of 37%. On-the-run CDX HY traded in a range bound between 375 to 420 basis points. Further, in US CLO market, the median YTD total return (through November 2016) was 2.8% for AAAs, 4.0% for AAs, 5.8% for single-As, and 11.3% for BBBs. The US loan index returned approximately 8.9% from Jan to Nov.

Within the MPL space specifically, the above conditions paired with greater investor acceptance—including the first rated deal consisting of Madden-Midland loans in Lending Club’s LCIT 2016-NP2.

Regulatory Uncertainty Remains High

Concerns of heightened regulatory scrutiny last year have given way to a largely constructive outlook, although regulatory uncertainty remains high.

Platforms are sponsoring self-regulatory efforts via trade associations such as SFIG and the Marketplace Lending Association. The message is resonating. In an important milestone for 2016, US Treasury, Federal Reserve, SEC, and the Office of the Comptroller of the Currency (OCC), each publicly acknowledged that marketplace lending is expanding access to credit to traditionally under-served segments.

Regulatory uncertainty remains high for marketplace lenders that rely on partner-funding bank model. The consensus view is that the risk that courts deem loans originated via the partner-funding bank model as invalid is low, although such an outcome, however remote, is paired with high severity.

In November, Thomas Curry, head of the OCC, announced that the agency would grant national bank charters to qualifying FinTech firms. Curry cited “public interest,” a “patchwork of supervision,” and the “great potential to expand financial inclusion” as motivations for the charter.

The charter would offer pre-emption—the ability of chartered FinTechs to export rates across state lines—and avoid the need for disparate state-by-state licensing or originating via partner-funding banks. In constructing the guidelines, the OCC seeks to continue to foster financial inclusion via FinTech innovation, while maintaining public confidence in national banks and the banking system more generally.

The supervisory guidelines in the proposal require, among other provisions, a top-down culture of compliance, a risk assessment and management framework, and to-be-specified capital and liquidity rules. (See here for PeerIQ’s summary of the supervisory guidelines).

The strict qualitative criteria suggest that the charter will be awarded sparingly, case-by-case, and to FinTechs that do not have going-concern risk. More fundamentally, the charter does not address the core funding and liquidity issues impacting the sector. The OCC is accepting comments on the charter and is expected to release final rules in April 2017.

Finally, there several new legislative proposals relevant to the MPL sector, which we summarize below:

Warehouse financing costs remain elevated due to a limited supply of warehouse finance, limited credit performance data, and concerns on data integrity (see CAN Capital credit facility breach).

We observe credit facility financing costs on unsecured personal loans in the 3.5% to 6.5% range. Financing costs are a function of counterparty risk, data integrity, asset class, credit performance, recourse vs. non-recourse financing, and ability to offload risk via an active ABS market.

 

Access to financing and liquidity continues to be central concern for investors in MPL space. This sentiment was highlighted when equity shares of OnDeck surged 5.4% immediately after the announcement of $200 Mn credit facility with Credit Suisse on December 9th.

Other publicly reported credit facility financings in the quarter include Fundation ($100 Mn line from GS), Solar Mosaic ($250 Mn from DB), and We Lab ($25 Mn line from ING Bank), and Apple Pie (SunTrust Bank).

Trigger Breaches

At the end of Q3, PeerIQ predicted several trigger breaches would take place in the ensuing months.

Trigger breaches are manifestation of unexpected credit performance, poor credit modeling, unguarded structuring practice. The average time to breach performance triggers for consumer MPL ABS deals was approximately 11 month as collateral losses ramped up within the deal.

 

During the past three months, four unsecured consumer and one SME deals had breached triggers. The exhibit below summarizes the ten active deals that had breached triggers in MPL ABS sector (eight unsecured consumer and two SME deals) with $1.3 Bn of total issuance volume (Note: below we excluded two additional retired deals that breached triggers (MPLT 2015-OD2 and MPLT 2015-OD1).

 

 

After two years of seasoning, CAN re-classified a portion of collateral loans that were represented as current but should have been treated as delinquent in CAN 2014-1A transaction—a material breach in representations and warranties. The newly identified delinquent loans also led to breach of the minimum excess spread trigger.

The negative headline associated with trigger breaches increased the cost and availability of funding for originators. The growing number of deals breaching triggers in MPL ABS are leading marketplace lenders taking greater control of their ABS programs to set standards and structure.

Sponsors and ABS investors are using sophisticated 3rd party analytics such as those offered by PeerIQ to independently model deal economics and monitor collateral on an on-going basis, perform 3rd party credit validation and verification.

Data & Standardization

Ratings agencies continued to raise the quality and history of data as key factors in their rating assessments. The paucity of historical data increases the error range on cumulative loss estimates which makes ratings assessment difficult.

Finally, we note that the Structured Finance Industry Group (SFIG) workstream on data reporting standards (including PeerIQ as a key participant) released a “Green Paper” providing for data reporting standards. SFIG also has a workstream on representations & warranties across originators—a welcome development for the sector.

Definitions and Inclusion Rules

Our Tracker includes all issuances connected to assets originated by marketplace lending platforms, which we define as including both:

  • Online and other novel technologies to increase operational efficiency, risk accuracy, and borrower experience, and
  • Non-deposit funding for lending capital.

We recognize there is rapid innovation in lending channels, and welcome all comments and consideration on inclusion rules.

  1. Quarterly Round-up

Despite holiday season slowdown, this past quarter saw ten securitization deals, adding $2.4 Bn in new issuance, consistent with Q3 record deal flow. This represents 23.0% YoY growth in total issuance year-to-date and 3.7% growth from Q3, Indeed, MPL securitization remains a bright spot in the ABS world, with its 23.0% YoY growth.

Total securitization issuance to date now stands at $15.1 Bn, with 72 deals issued to date (43 Consumer, 20 Student, 1 Mortgage and 8 SME) since September 2013 (Exhibit 1).

 

Examining issuance by underlying collateral segment, we see that Consumer and Student have similar volumes, with Consumer continuing to lead with $7.1 Bn issued to date, as compared to Student at $6.0 Bn (Exhibit 2). Issuance activities in the Small-Medium Enterprise (SME) space was muted for the quarter. SME remains the smallest segment with $1.7 Bn total issuance.

There were eight new deals in Q4 2016:

  • SoFi: SOFI 2016-E, SCLP 2016-3, SCLP 2016-5, SOFI 2016-F, SFPMT 2016-1
  • LendingClub: LCIT 2016-NP2, MHMT 2016-LC1
  • Earnest: EARN 2016-D
  • Prosper: INSKT 2016-1
  • CommonBond: CBSLT 2016-B

This quarter, SoFi priced its inaugural residential mortgage-backed securitization, which is backed by a $169 Mn pool of first-lien, fixed-rate, prime residential mortgage loans originated by SoFi. SFPMT 2016-1, led by Barclays, will issue four classes of super senior notes, and two tranches of supportive senior notes. (See PeerIQ newsletter for further analysis.)

Since 2010, the market has issued approximately $40 Bn of prime jumbo securitizations dominated by bank players like J.P. Morgan and Credit Suisse, with combined new issuance market share of over 50%. SoFi’s inaugural prime jumbo securitization had demonstrated its ability to grow through value-added origination across verticals, starting with student loan refinance, unsecured consumer loans, and then mortgages. It also supports our thesis that the demarcation line between FinTech and traditional asset classes will be blurred as this emerging industry grows.

In addition to the expansion into new collateral category prime jumbo mortgages, rating agency blessing continues to be a key driver for strong deal execution. All deals issued in 4Q16 were rated by at least one rating agency (Exhibit 5), except for MHMT 2016-LC1 and INSKT 2016-1. As of today, we track 120 MPL ABS rated by rating agencies, of which, 24% were rated in 4Q16, representing stabilized rating agency participation (Exhibit 6). Again, we expect that the vast majority of MPL ABS to be rated as issuers seek to broaden the base of eligible investors.

 

Of note, in Q4, Jefferies brought the first rated LendingClub Near-Prime securitization LCIT 2016-NP2 into the market. This second LCIT shelf deal is also consisted of Madden-Midland loans in its collateral pool. Given the collateral pool of the LCIT 2016-NP1 (unrated) and NP2 (rated) deals are similar and tranches have the identical credit enhancement, the expected loss of each tranche should also be comparable. However, the pricing for LCIT 2016-NP2 A (BBB-rated) was about 75 basis points tighter than LCIT 2016-NP1 A (Non-rated) tranche.

The emergence of rated securities from LCIT shelf also supports our belief that the rating agencies are more comfortable in rating this nascent industry with more historical performance data. Issuers are more inclined to get their deals rated to expand their investor base and increase their credibility with investors.

On the SME front, despite lack of new issuance for the quarter, OnDeck, the leading SME online lender, closed a $200 Mn DBRS A- rated asset-backed revolving debt facility with Credit Suisse, Prime OnDeck Receivable Trust II. The rating of the Class A Loans reflected the 18% of initial hard credit enhancement comprised of the 1% reserve account and 17% overcollateralization. Additional credit support may be provided from excess spread available in the structure.

Finally, deals continue to increase in average deal size over time, led primarily by SoFi’s large placements. The average securitization deal now stands at $267 Mn for 2016.

  1. MPL Securitization League Tables

We continue to see Goldman Sachs and Morgan Stanley ramping up deal participation aggressively in Q4. Maintaining its one number rank on league table, Goldman Sachs was involved in $3.6 Bn in total new issuance, a 44% growth from 3Q16. GS worked with SoFi, CommonBond, and Earnest and other originators to capture about 23% of the market share in MPL ABS by issuance volume. Further, Morgan Stanley showed 60% growth in deal participation with $3.3 Bn in total volume for the quarter, a 4% increase in market share from 3Q2016. Top three dealers, Goldman Sachs, Morgan Stanley, and Citi, took over about 50% of the total market share in MPL space.

Further, as mentioned in our 3Q2016 tracker, banks had pulled back from financing business in MPL space due to recent headlines, regulatory risks, or firm-specific considerations. Yet, dealers continued to display heightened interest in MPL ABS securitization, intermediating originators’ demand for financing and absolute investors’ desire for yield. In particular, we saw Mizuho Securities participated its first MPL ABS transaction (SOFI 2016-F) with Morgan Stanley in December.

As evidenced by the continued issuance, the impact of Dodd-Frank risk retention rules, effective on December 24, 2016, has not led to an appreciable slowdown in new issuance activities. The risk retention rule had indeed slowed down the issuance activities and led to consolidation for mature securitization markets such as Commercial Mortgage Backed Securities (CMBS) and Collateralized Loan Obligation (CLO) market.

Overall, the rule suggested that securitizers will need to commit approximately $23 Bn of new capital to sustain current overall new issuance securitization market in US.

The negative impact of risk retention is masked and by the growth rate of the MPL ABS market and by dealers’ positioning to gain market share.

Turning to the co-manager league table, SoFi doubled deal volume this quarter to $3.0 Bn. As telegraphed by SoFi, SoFi ended 2016 with twelve new deals across student, personal, and mortgage verticals. SoFi is the co-manager for almost all of its deals, capturing approximately 40% of total new issuance (Exhibit 7).

Deutsche Bank raced head of BoA and took over the second position with $684 Mn of deal volume on the co-manager league table, continuing its growth with strong conviction in supporting the MPL ecosystem. The top three co-managers on the league table took over approximately 60% of the total market share. Greensledge, replacing Credit Suisse, stepped into the six place with $421 Mn in deal participation.

Kroll, S&P and Fitch in the amount of rated bonds. DBRS rated $6.4 Bn Student MPL ABS, or approximately 47% of sub-segment, competing primarily against Moody’s within the student sector. Kroll dominates the Consumer MPL ABS category with about 50% market share. The mortgage sub-segment currently has an even split amongst DBRS, Fitch and Kroll.

III. New Issuance Spreads

New issuance spreads in 4Q16 continued to tighten across capital structures, reflecting a healthy risk appetite in the capital markets. Further, we saw a continued preference for senior tranches over riskier subordinated bonds. As reflected in the exhibit below, this overall senior preference leads to a steepening of the overall term structure, with investors demanding higher premiums for riskier tranches— and this remains true across all loan segments. This is particularly evident in student sub-segment. Credit spread curves shifted downward in parallel, suggesting an overall yield compression and favorable credit environment in 4Q16.

  1. Outlook

The outlook for the year ahead presents new challenges and opportunities for marketplace lenders.

We expect higher volatility from rising rates, increased regulatory uncertainty, and an exit from a post-crisis period characterized by unusually benign credit performance.

We see opportunities for lenders, as consumer borrowers move out of the de-leveraging phase, which expands the total addressable market. We also see increased bank partnerships as banks seek to improve their ROE and cover their cost of capital by partnering with MPL originators.

Higher Interest Rates

High financing costs continue to driving a wedge between would-be whole loan buyers and originators. Higher short-term interest rates from a Fed tightening cycle will further reduce net margins for whole loan investors.

Platforms that can successfully pass on rates to borrowers to offset the reduction in net interest margin reduction, increase operating efficiencies, or improve execution in the ABS market stand to take market share. We expect Fed rate hike as a continuation of a tightening cycle. Higher rates will leader to higher ABS coupons for 2017. Therefore, we expect to see originators re-price interest rates on MPL loans.

Higher Volatility from Regulatory Uncertainty

Although the regulatory outlook is constructive, regulatory uncertainty remains high.

Market participants are optimistic. Financial stocks as reflected by the KBW Index have rallied over 20% since Election Day pricing in greater growth from deregulation and earnings from higher rates. Markets expect a bias to action from the Trump administration, a more favorable regulatory outlook, and potential for relief on risk retention, bank capital

  • liquidity requirements, and a reduction in CFPB and SEC enforcement actions. Markets appear to be pricing in near perfect execution of an idealized regulatory environment. We see this as unlikely.

The President-elect Trump’s transition team, including the nominee for Treasury Secretary, has indicated the new administration wants to “strip back” parts of Dodd-Frank. While the new administration has made some general statements about Dodd-Frank, it’s too early to tell which changes may materialize.

Within MPL specifically, the SEC, the OCC, and state regulators have differing views on jurisdiction and approach to regulation.

Moreover, given the cloture rules in the Senate which require 60 votes to overcome a filibuster, we expect the pace of regulatory relief will be slower than most market participants expect

Re-Normalization of Credit Performance

We are now seven years behind the Great Recession. Consistent with Fair Credit Reporting Act waiting period requirements, derogatory credit items (“derogs”) associated with bankruptcy, foreclosure, and short sales will fall off borrower credit bureau reports in 2017. As a result, we expect an expansion of credit eligible borrowers.

Also, borrowers that defended their credit scores through the cycle have positively self-selected. All things being equal, a borrower with a credit score of 700 today is not as strong as a borrower with a score of 700 after the Great Recession.

For 2017, we expect:

  1. Robust growth—a 47% increase in ABS volumes and greater dealer participation
  1. Continued shift to standardized, repeat issuance
  1. New products and additional modes of distribution
  1. Continued trend of bank partnership
  1. Greater investments in 3rd party solutions to improve investor confidence

Continued Growth in ABS Issuance Volumes

As marketplace lending loan growth rates in the US have accelerated over the last few years, lenders have become increasingly reliant on institutional capital, with many platforms particularly focused on securitization as core pillar of funding.

Rated securitization has moved from a coming-of-age milestone in the maturation of an originator, to an essential pillar for funding new origination. We forecast a 47% growth in ABS issuance under our base case scenario.

The re-normalization of credit performance will create significant analytical challenges for underwriting and investment analysis. For instance, as losses will revert to historical levels, models trained on post-crisis data will tend to underestimate losses.

Further, lenders face new constraints in how they manage their risk from consumer protection regulation such as the CARD Act of 2009, which among other rules, eliminated “universal default” as a mechanism for mitigating risk.

Advanced risk analytics and historical data (such as offerings produced from uniting the TransUnion dataset with PeerIQ analytics) will play an important role in risk assessment and management for originations and investors alike.

Strong ABS Issuance Outlook

As we noted in our prior securitization tracker, numerous factors—platform rate increases, tighter underwriting, spread tightening in the primary and secondary ABS markets—improve the economics for whole loan buyers that fund via securitization.

Exhibit 15 below confirms our thesis that securitization is an essential pillar for the marketplace lending industry. Our analysis finds that the percentage of loans securitized via ABS stands at an all-time high of 70%.

 

Shifting Towards Standardized and Repeat Issuance

We anticipate greater participation in the securitization space as one-off issuers seek to become repeat issuers to optimize deal cost and capital market distribution.

PeerIQ anticipates the rise of contributed collateral “club deals” as platforms seek to dive standardization in deal terms while also offering whole loan investors a quarterly path to liquidity.

The growth in club deals will usher in a higher level of data homogenization, greater consistency in deal structure, increased data integrity, and consistent valuation methods.

New Products and Additional Modes of Distribution

Outside of securitization, additional modes of distribution will emerge. RiverNorth received SEC approval for a MPL-dedicated close-end fund in Q3, signaling the maturation of another major funding source for marketplace lending platforms. Other auxiliary funding channels including asset managers offering term capital, CUSIPs, private equity, and seasoning vehicles will expand the investors base for marketplace lending category.

Bank Partnerships

The seismic regulatory changes post the Great Recession of 2008 has forced the global banking sector to adjust the pre-2008 business model.

We argued in prior research that banks can improve their ROE position by funding or financing whole loans from marketplace lenders, and that most banks will choose to partner with marketplace lenders rather than compete.

We believe 2017 will feature a number of bank partnerships with non-banks, and increased competition from traditional banks.

We expect traditional banks to cooperate with marketplace lenders to marry their low-cost funding profile with low-cost operations of marketplace lenders.

Greater Investments in 3rd Party Solutions

To gain investor confidence, marketplace lenders are now adjusting to the demand from warehouse lenders and whole loan investors for greater transparency and due diligence, including independent reviews, “hot” back-up servicing arrangements, verification, credit validation and heightened data integrity standards.

Further, the recent uptick in delinquency and losses in SME and other sub-segments, in general, leads to a persistent focus on fundamentals, such as credit underwriting and acquisition cost.

Originators and ABS investors will extend their investments in 3rd party data and analytics for a variety of investment and distribution activities, such as structuring deal waterfalls, determining deal collateral triggers, monitoring deal performance, coordinating club securitization deals, and improving investor confidence with loan-level data transparency.

The above trends highlight the need for 3rd party analytics, such as those offered by PeerIQ, to improve transparency, standardization, comparability, with the goal of improving investor confidence and the smooth functioning of ABS markets.

We remain optimistic on the marketplace lending ecosystem. The broad secular trends underpinning non-bank lending growth and the global demand for yield remain intact.

Appendix: Marketplace Lending Securitizations to Date

Ticker Type Originator Shelf Issuer Issue Date Collat Amt Credit Amt Initial WAL Coupo Initial Est. Mood S&P DBR Fitc Kroll Rate
($mm) Support ($mm) (yrs) n Type Coupo Pricing ys S h d
SOFI 2016-F A1 Student SoFi SOFI SoFi 22-Dec-16 131.66 16.1% 40.7 3.22 Floating 1.95 n/a A2 Rated
SOFI 2016-F A2 Student SoFi SOFI SoFi 22-Dec-16 131.66 16.1% 82.8 3.48 Fixed 3.02 n/a A2 Rated
SOFI 2016-F B Student SoFi SOFI SoFi 22-Dec-16 131.66 11.0% 7.2 9.51 Variable 4.45 n/a Baa2 Rated
LCIT 2016-NP2 A Consumer Lending Club LCIT LendingClub 2-Dec-16 121.73 35.5% 85.3 1.6 Fixed 3.00 195 BBB Rated
LCIT 2016-NP2 B Consumer Lending Club LCIT LendingClub 2-Dec-16 121.73 23.0% 16.4 2.4 Fixed 6.00 458 BB+ Rated
SFPMT 2016-1A 1A6 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 15.0% 84.1 4.8 Variable 3.00 220 AAA AAA AAA Rated
SFPMT 2016-1A 1A8 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 15.0% 28.0 4.8 Variable 3.00 210 AAA AAA AAA Rated
SFPMT 2016-1A 1AMF Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 6.1% 11.8 4.8 Variable 3.00 250 AAA AAA AAA Rated
SFPMT 2016-1A 2A6 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 15.0% 23.5 3.66 Variable 2.50 195 AAA AAA AAA Rated
SFPMT 2016-1A 2A8 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 15.0% 7.8 3.66 Variable 2.50 180 AAA AAA AAA Rated
SFPMT 2016-1A 2AMF Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 6.1% 3.3 3.66 Variable 2.50 215 AAA AAA AAA Rated
SFPMT 2016-1A B1 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 3.7% 4.0 n/a Variable 3.17 n/a AA AA AA Rated
SFPMT 2016-1A B2 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 2.3% 2.4 n/a Variable 3.17 n/a A A A Rated
SFPMT 2016-1A B3 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 1.6% 1.2 n/a Variable 3.17 n/a BBB BBB BBB Rated
SFPMT 2016-1A B4 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 1.1% 0.9 n/a Variable 3.17 n/a BB BB BB Rated
SFPMT 2016-1A B5 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 0.6% 0.8 n/a Variable 3.17 n/a B B B Rated
SFPMT 2016-1A B6 Mortgage SoFi SFPMT SoFi 1-Dec-16 168.79 0.0% 1.0 n/a Variable 3.17 n/a 0
SOFI 2016-E A1 Student SoFi SOFI SoFi 22-Nov-16 584.42 16.4% 164.6 2.97 Floating 1.38 85 Aaa AAA Rated
SOFI 2016-E A2A Student SoFi SOFI SoFi 22-Nov-16 584.42 16.5% 203.3 1.25 Fixed 1.63 55
SOFI 2016-E A2B Student SoFi SOFI SoFi 22-Nov-16 584.42 16.5% 155.2 4.63 Fixed 2.49 90 Aaa AAA Rated
SOFI 2016-E B Student SoFi SOFI SoFi 22-Nov-16 584.42 10.6% 37.0 n/a Fixed 3.44 175
SOFI 2016-E C Student SoFi SOFI SoFi 22-Nov-16 584.42 6.7% 24.4 8.43 Variable 4.43 265 Baa2 AL Rated
SCLP 2016-5 A Consumer SoFi SCLP SoFi 18-Nov-16 250.02 25.2% 188.3 1.86 Fixed 3.06 n/a A A+ Rated
SCLP 2016-5 B Consumer SoFi SCLP SoFi 18-Nov-16 250.02 15.1% 25.4 4.98 Fixed 4.55 n/a
INSKT 2016-1 A Consumer Prosper INSKT Insikt 2-Nov-16 24.80 30.7% 17.2 1.02 Fixed 4.00 n/a
INSKT 2016-1 B Consumer Prosper INSKT Insikt 2-Nov-16 24.80 9.2% 5.3 3.23 Fixed 11.00 n/a
EARN 2016-D A1 Student Earnest EARN Earnest 31-Oct-16 174.74 13.5% 51.3 3.69 Floating 2.16 140 A AAL Rated
EARN 2016-D A2 Student Earnest EARN Earnest 31-Oct-16 174.74 13.5% 104.2 3.56 Fixed 2.72 155 A AAL Rated
EARN 2016-D B Student Earnest EARN Earnest 31-Oct-16 174.74 6.1% 13.4 4.16 Fixed 3.80 260 BBB Rated
EARN 2016-D C Student Earnest EARN Earnest 31-Oct-16 174.74 2.9% 5.9 4.33 Fixed 4.39 500 BB Rated
CBSLT 2016-B A1 Student CommonBond CBSLT CommonBond 20-Oct-16 168.63 15.0% 86.7 3.92 Fixed 2.73 155 A1 AAL Rated
CBSLT 2016-B A2 Student CommonBond CBSLT CommonBond 20-Oct-16 168.63 15.0% 64.2 3.79 Floating 2.21 145 A1 AAL Rated
CBSLT 2016-B B Student CommonBond CBSLT CommonBond 20-Oct-16 168.63 5.0% 17.7 4.4 Fixed 4.00 280 BBB Rated
MHMT 2016-LC1 A Consumer Lending Club MHMT Prospect 13-Oct-16 314.14 35.5% 204.2 0.62 Fixed 4.19 336
MHMT 2016-LC1 B Consumer Lending Club MHMT Prospect 13-Oct-16 314.14 23.0% 39.3 1.63 Fixed 6.15 396
MHMT 2016-LC1 C Consumer Lending Club MHMT Prospect 13-Oct-16 314.14 10.0% 39.3 2 Fixed 10.00 n/a
SCLP 2016-3 A Consumer SoFi SCLP SoFi 13-Oct-16 599.94 24.7% 451.7 1.85 Fixed 3.05 200 A A Rated
SCLP 2016-3 B Consumer SoFi SCLP SoFi 13-Oct-16 599.94 14.6% 60.9 4.97 Variable 4.49 233 BBB BBB Rated
SOFI 2016-D A1 Student SoFi SOFI SoFi 19-Sep-16 483.04 29.6% 142.8 3.31 Floating 1.60 95 Aaa AAA Rated
SOFI 2016-D A2A Student SoFi SOFI SoFi 19-Sep-16 483.04 27.8% 134.4 1.22 Fixed 1.53 55 Aaa AAA Rated
SOFI 2016-D A2B Student SoFi SOFI SoFi 19-Sep-16 483.04 26.7% 128.8 5.02 Fixed 2.34 110 Aaa AAA Rated
SOFI 2016-D B Student SoFi SOFI SoFi 19-Sep-16 483.04 6.4% 30.7 8.77 Variable 3.23 175 A1 AAL Rated
SCLP 2016-4 A Consumer SoFi SCLP SoFi 13-Sep-16 223.10 20.5% 178.5 1.96 Fixed 3.18 214 A Rated
SCLP 2016-4 B Consumer SoFi SCLP SoFi 13-Sep-16 223.10 17.0% 7.8 5 Variable 4.83 358 BBB+ Rated
SCLP 2016-4 C Consumer SoFi SCLP SoFi 13-Sep-16 223.10 9.5% 16.7 5.12 Variable 5.92 467 BBB- Rated
CILO 2016-LD1 A Consumer Cross River Bank CILO Ellington 24-Aug-16 112.91 30.0% 87.0 1.18 FIXED 3.96 396
CILO 2016-LD1 B Consumer Cross River Bank CILO Ellington 24-Aug-16 112.91 15.0% 18.7 3.13 FIXED 5.50 550
AVNT 2016-C A Consumer Avant AVNT Avant 16-Aug-16 312.59 56.9% 138.0 0.39 Fixed 2.96 350 A- Rated
AVNT 2016-C B Consumer Avant AVNT Avant 16-Aug-16 312.59 31.5% 79.2 1.56 Fixed 4.92 700 BBB- Rated
AVNT 2016-C C Consumer Avant AVNT Avant 16-Aug-16 312.59 19.3% 38.1 2.5 Fixed 8.83 779 BB Rated
LCIT 2016-NP1 A Consumer Lending Club LCIT LendingClub 4-Aug-16 135.48 n/a 86.7 n/a Fixed 3.75 297
LCIT 2016-NP1 B Consumer Lending Club LCIT LendingClub 4-Aug-16 135.48 n/a 16.7 n/a Fixed 6.50 560
MFT 2016-1A A Consumer Cross River Bank MFT Marlette 2-Aug-16 205.44 72.5% 148.9 n/a Fixed 3.06 225 A Rated
MFT 2016-1A B Consumer Cross River Bank MFT Marlette 2-Aug-16 205.44 8.7% 18.0 n/a Fixed 4.78 385 BBB Rated
MFT 2016-1A C Consumer Cross River Bank MFT Marlette 2-Aug-16 205.44 8.7% 18.0 n/a Fixed 9.09 825 BB Rated
SCLP 2016-2 A Consumer SoFi SCLP SoFi 1-Aug-16 575.52 26.5% 425.9 1.84 Fixed 3.09 215 A A Rated
SCLP 2016-2 B Consumer SoFi SCLP SoFi 1-Aug-16 575.52 17.0% 54.7 4.87 Variable 4.77 365 BBB BBB Rated
EARN 2016-C A1 Student Earnest EARN Earnest 29-Jul-16 200.75 28.3% 56.8 3.62 Floating 2.33 185 AAL Rated
EARN 2016-C A2 Student Earnest EARN Earnest 29-Jul-16 200.75 59.3% 119.0 3.57 Fixed 2.68 180 AAL Rated
EARN 2016-C B Student Earnest EARN Earnest 29-Jul-16 200.75 6.8% 13.7 4.03 Fixed 4.46 340 BBB Rated

 

Ticker Type Originator Shelf Issuer Issue Date Collat Amt Credit Amt ($mm) Initial WAL Coupon Initial Est. Moodys S&P DBRS   Fitch Kroll Rated
($mm) Support (%) (yrs) Type Coupon Pricing
SOFI 2016-C A1 Student SoFi SOFI SoFi 27-Jul-16 467.50 27.5% 128.6 3.26 Floating 1.59 110 Aaa AAA Rated
SOFI 2016-C A2A Student SoFi SOFI SoFi 27-Jul-16 467.50 30.5% 142.5 1.26 Fixed 1.48 65 Aaa AAA Rated
SOFI 2016-C A2B Student SoFi SOFI SoFi 27-Jul-16 467.50 26.0% 121.7 4.98 Fixed 2.36 135 Aaa AAA Rated
SOFI 2016-C B Student SoFi SOFI SoFi 27-Jul-16 467.50 6.4% 29.8 8.49 Variable 3.35 200 A2 AAL Rated
SCLP 2016-1 A Consumer SoFi SCLP SoFi 27-Jun-16 506.40 25.5% 379.8 2.3 Fixed 3.26 238 A A Rated
SOFI 2016-B A1 Student SoFi SOFI SoFi 26-May-16 427.03 23.7% 101.4 3.28 Floating 1.72 120 Aaa AAA Rated
SOFI 2016-B A2A Student SoFi SOFI SoFi 26-May-16 427.03 28.7% 122.7 1.14 Fixed 1.68 80 Aaa AAA Rated
SOFI 2016-B A2B Student SoFi SOFI SoFi 26-May-16 427.03 30.8% 131.5 4.78 Fixed 2.74 145 Aaa AAA Rated
SOFI 2016-B B Student SoFi SOFI SoFi 26-May-16 427.03 5.6% 24.1 8.25 Fixed 3.80 225 A2 AH Rated
ONDK 2016-1A A SME OnDeck ONDK OnDeck 17-May-16 265.96 23.6% 211.5 2.28 Fixed 4.21 325 BBB+ A Rated
ONDK 2016-1A B SME OnDeck ONDK OnDeck 17-May-16 265.96 9.6% 38.5 2.71 Fixed 7.63 670 BB- BBBL Rated
EARN 2016-B A1 Student Earnest EARN Earnest 11-May-16 241.93 27.2% 65.8 3.69 Floating 2.57 205 A A Rated
EARN 2016-B A2 Student Earnest EARN Earnest 11-May-16 241.93 61.9% 149.6 3.5 Fixed 3.02 200 A A Rated
EARN 2016-B B Student Earnest EARN Earnest 11-May-16 241.93 4.0% 9.6 4.17 Variable 4.81 375 BBB BBB+ Rated
AVNT 2016-B A Consumer Avant AVNT Avant 28-Apr-16 344.83 49.1% 179.1 0.56 Fixed 3.92 325 A- Rated
AVNT 2016-B B Consumer Avant AVNT Avant 28-Apr-16 344.83 26.8% 76.7 1.83 Fixed 7.80 700 BBB- Rated
AVNT 2016-B C Consumer Avant AVNT Avant 28-Apr-16 344.83 13.8% 44.8 2.73 Fixed 10.60 1,150 BB Rated
CBSLT 2016-A A1 Student CommonBond CBSLT CommonBond 21-Apr-16 162.72 57.6% 93.8 4.3 Fixed 3.32 225 AH Rated
CBSLT 2016-A A2 Student CommonBond CBSLT CommonBond 21-Apr-16 162.72 29.9% 48.6 4.21 Floating 2.72 225 AH Rated
CBSLT 2016-A B Student CommonBond CBSLT CommonBond 21-Apr-16 162.72 6.6% 10.8 4.2 Fixed 4.00 395 BBB Rated
CHAI 2016-PM1 A Consumer Prosper CHAI Citi 31-Mar-16 314.56 33.0% 212.3 0.97 Fixed 4.65 400 A- A Rated
CHAI 2016-PM1 B Consumer Prosper CHAI Citi 31-Mar-16 314.56 25.1% 24.9 2.44 Fixed 7.67 700 BBB- BBB Rated
CHAI 2016-PM1 C Consumer Prosper CHAI Citi 31-Mar-16 314.56 12.0% 41.2 2.83 Fixed 10.26 1,145 B BB- Rated
CHAI 2016-MF1 A Consumer Marlette CHAI Citi 4-Mar-16 156.50 28.0% 113.5 n/a Fixed 4.48 400 A Rated
CHAI 2016-MF1 B Consumer Marlette CHAI Citi 4-Mar-16 156.50 19.2% 13.7 n/a Fixed 6.64 600 BBB Rated
CHAI 2016-MF1 C Consumer Marlette CHAI Citi 4-Mar-16 156.50 10.5% 13.7 n/a Fixed 10.39 990 BB Rated
SOFI 2016-A A1 Student SoFi SOFI SoFi 4-Mar-16 591.51 22.6% 133.6 3.8 Floating 2.27 200 Aa2 AAA Rated
SOFI 2016-A A2 Student SoFi SOFI SoFi 4-Mar-16 591.51 62.2% 367.9 3.65 Fixed 2.76 205 Aa2 AAA Rated
SOFI 2016-A B Student SoFi SOFI SoFi 4-Mar-16 591.51 8.4% 49.9 4.14 Fixed 3.57 350 Baa2 BBBH Rated
AVNT 2016-A A Consumer Avant AVNT Avant 26-Feb-16 344.91 51.0% 172.4 0.45 Fixed 4.11 350 A- Rated
AVNT 2016-A B Consumer Avant AVNT Avant 26-Feb-16 344.91 30.0% 72.4 1.68 Fixed 7.65 700 BBB- Rated
AVNT 2016-A C Consumer Avant AVNT Avant 26-Feb-16 344.91 14.0% 55.2 2.66 Fixed 9.79 na BB Rated
MPLT 2016-LD1 A Consumer LoanDepot MPLT Jefferies 19-Feb-16 100.00 26.0% 74.0 1.31 Fixed 5.25 451
MPLT 2016-LD1 B Consumer LoanDepot MPLT Jefferies 19-Feb-16 100.00 11.5% 14.5 3.89 Fixed 9.50 849
EARN 2016-A A1 Student Earnest EARN Earnest 10-Feb-16 119.48 29.1% 34.7 3.51 Floating 1.99 215 A Rated
EARN 2016-A A2 Student Earnest EARN Earnest 10-Feb-16 119.48 58.8% 70.2 3.51 Fixed 2.50 215 A Rated
EARN 2016-A B Student Earnest EARN Earnest 10-Feb-16 119.48 5.9% 7.1 3.8 Fixed 2.50 290 BBB Rated
MPLT 2015-OD4 A SME OnDeck MPLT Jefferies 24-Dec-15 151.21 15.0% 134.9 n/a Fixed 3.25 287 A Rated
MPLT 2015-OD4 B SME OnDeck MPLT Jefferies 24-Dec-15 151.21 5.0% 15.9 n/a Fixed 5.25 412 BBB Rated
CHAI 2015-PM3 A Consumer Prosper CHAI Citi 18-Dec-15 299.11 46.5% 161.5 0.78 Fixed 2.56 190 (P)A3 A+ Rated
CHAI 2015-PM3 B Consumer Prosper CHAI Citi 18-Dec-15 299.11 26.5% 59.8 2.2 Fixed 4.31 350 (P)Baa3 BBB+ Rated
CHAI 2015-PM3 C Consumer Prosper CHAI Citi 18-Dec-15 299.11 12.0% 43.4 3.37 Fixed 6.99 525 (P)Ba3 BB- Rated
MPLT 2015-CB2 A Consumer CircleBack MPLT Jefferies 15-Dec-15 151.20 22.0% 119.4 n/a Fixed 5.00 na
MPLT 2015-CB2 B Consumer CircleBack MPLT Jefferies 15-Dec-15 151.20 17.0% 7.6 n/a Fixed 6.50 na
AMPLT 2015-A A Consumer Avant AMPLT Avant 19-Nov-15 194.40 30.0% 136.1 1.07 Fixed 5.00 406
AMPLT 2015-A B Consumer Avant AMPLT Avant 19-Nov-15 194.40 20.0% 19.4 1.66 Fixed 6.75 581
AMPLT 2015-A C Consumer Avant AMPLT Avant 19-Nov-15 194.40 10.0% 19.4 1.66 Fixed 8.75 781
SOFI 2015-D A1 Student SoFi SOFI SoFi 18-Nov-15 573.04 27.0% 154.9 3.86 Floating 2.02 150 Aa2 AAA Rated
SOFI 2015-D A2 Student SoFi SOFI SoFi 18-Nov-15 573.04 58.4% 334.8 3.74 Fixed 2.72 150 Aa2 AAA Rated
SOFI 2015-D B Student SoFi SOFI SoFi 18-Nov-15 573.04 8.1% 46.7 4.64 Fixed 3.59 235 Baa2 BBBH Rated
MPLT 2015-LD1 A Consumer LoanDepot MPLT Jefferies 13-Nov-15 88.28 18.0% 123.0 1.74 Fixed 4.00 381
MPLT 2015-LD1 B Consumer LoanDepot MPLT Jefferies 13-Nov-15 88.28 13.0% 7.5 1.74 Fixed 6.00 506
MPLT 2015-LD1 C Consumer LoanDepot MPLT Jefferies 13-Nov-15 88.28 8.0% 7.5 1.74 Fixed 8.00 706
INSKT 2015-3 A Consumer Prosper INSKT Insikt 4-Nov-15 42.00 n/a 32.0 n/a Fixed 4.50 439
INSKT 2015-3 B Consumer Prosper INSKT Insikt 4-Nov-15 42.00 n/a 9.1 n/a Fixed 9.50 947
CHAI 2015-PM2 A Consumer Prosper CHAI Citi 23-Oct-15 419.76 45.0% 230.9 0.77 Fixed 2.35 195 A3 Rated
CHAI 2015-PM2 B Consumer Prosper CHAI Citi 23-Oct-15 419.76 24.5% 86.1 2.19 Fixed 4.00 275 Baa3 Rated
CHAI 2015-PM2 C Consumer Prosper CHAI Citi 23-Oct-15 419.76 10.5% 58.8 2.97 Fixed 5.96 450 Ba3 Rated

 

Ticker Type Originator Shelf Issuer Issue Date Collat Amt Credit Amt ($mm) Initial WAL Coupon Initial Est. Moodys S&P DBRS   Fitch Kroll Rated
($mm) Support (%) (yrs) Type Coupon Pricing
MPLT 2015-AV2 A Consumer Avant MPLT Jefferies 16-Oct-15 111.01 30.6% 86.3 n/a Fixed 4.00 351
MPLT 2015-AV2 B Consumer Avant MPLT Jefferies 16-Oct-15 111.01 20.7% 12.3 n/a Fixed 5.75 510
MPLT 2015-AV2 C Consumer Avant MPLT Jefferies 16-Oct-15 111.01 10.7% 12.3 n/a Fixed 7.50 685
MPLT 2015-AV1 A Consumer Avant MPLT Jefferies 24-Sep-15 126.52 30.1% 88.5 1.08 Fixed 4.00 316
MPLT 2015-AV1 B Consumer Avant MPLT Jefferies 24-Sep-15 126.52 20.1% 12.6 1.69 Fixed 5.75 495
MPLT 2015-AV1 C Consumer Avant MPLT Jefferies 24-Sep-15 126.52 10.1% 12.6 1.69 Fixed 7.50 670
MPLT 2015-OD3 A SME OnDeck MPLT Jefferies 15-Sep-15 79.63 19.7% 67.7 0.54 Fixed 3.25 281
MPLT 2015-OD3 B SME OnDeck MPLT Jefferies 15-Sep-15 79.63 10.2% 8.0 1.28 Fixed 5.25 na
AVNT 2015-A A Consumer Avant AVNT Avant 12-Aug-15 140.00 26.5% 108.4 1.09 Fixed 4.00 342
AVNT 2015-A B Consumer Avant AVNT Avant 12-Aug-15 140.00 16.0% 15.5 1.69 Fixed 6.00 521
AVNT 2015-A C Consumer Avant AVNT Avant 12-Aug-15 140.00 5.5% 15.5 1.69 Fixed 7.75 721
MPLT 2015-OD2 A SME OnDeck MPLT Jefferies 12-Aug-15 73.06 15.5% 59.0 0.42 Fixed 3.25 289
MPLT 2015-OD2 B SME OnDeck MPLT Jefferies 12-Aug-15 73.06 5.5% 6.9 0.97 Fixed 5.25 na
CHAI 2015-PM1 A Consumer Prosper CHAI Citi 5-Aug-15 420.90 46.0% 227.3 0.71 Fixed 1.85 140 A3 Rated
CHAI 2015-PM1 B Consumer Prosper CHAI Citi 5-Aug-15 420.90 25.5% 86.3 2.08 Fixed 2.93 200 Baa3 Rated
CHAI 2015-PM1 C Consumer Prosper CHAI Citi 5-Aug-15 420.90 10.5% 63.1 3.25 Fixed 5.01 385 Ba3 Rated
SOFI 2015-C A1 Student SoFi SOFI SoFi 4-Aug-15 447.56 30.5% 136.5 3.81 Floating 1.57 105 Aa2 AAA Rated
SOFI 2015-C A2 Student SoFi SOFI SoFi 4-Aug-15 447.56 56.0% 250.8 3.67 Fixed 2.51 98 Aa2 AAA Rated
SOFI 2015-C B Student SoFi SOFI SoFi 4-Aug-15 447.56 6.8% 30.3 5.41 Fixed 3.58 184 Baa2 BBBH Rated
INSKT 2015-2 A Consumer Prosper INSKT Insikt 10-Jul-15 4.50 n/a 3.6 n/a Fixed 4.50 438
INSKT 2015-2 B Consumer Prosper INSKT Insikt 10-Jul-15 4.50 n/a 0.8 n/a Fixed 9.50 946
CBSLT 2015-A A1 Student CommonBond CBSLT CommonBond 24-Jun-15 105.00 91.8% 96.4 n/a Fixed 3.20 165 Baa2 AH Rated
SOFI 2015-B A1 Student SoFi SOFI SoFi 9-Jun-15 441.18 33.2% 146.7 3.75 Floating 1.57 105 Aa3 A AAH Rated
SOFI 2015-B A2 Student SoFi SOFI SoFi 9-Jun-15 441.18 53.4% 235.4 3.59 Fixed 2.51 105 Aa2 A AAH Rated
SOFI 2015-B B Student SoFi SOFI SoFi 9-Jun-15 441.18 6.8% 29.8 5.14 Fixed 3.52 165 Baa3 BBB Rated
MPLT 2015-OD1 A SME OnDeck MPLT Jefferies 4-Jun-15 52.08 15.0% 44.3 0.58 Fixed 3.25 266
MPLT 2015-OD1 B SME OnDeck MPLT Jefferies 4-Jun-15 52.08 5.0% 5.2 1.19 Fixed 5.25 na
MPLT 2015-CB1 A Consumer CircleBack MPLT Jefferies 3-Jun-15 110.06 22.0% 99.9 n/a Fixed 4.00 312
MPLT 2015-CB1 B Consumer CircleBack MPLT Jefferies 3-Jun-15 110.06 17.0% 6.3 n/a Fixed 6.00 511
ECLT 2014-1 A Consumer Lending Club ECLT Eaglewood 1-May-15 150.00 n/a 120.0 2.25 Fixed 3.50 260
ECLT 2014-1 B Consumer Lending Club ECLT Eaglewood 1-May-15 150.00 n/a 22.5 2.54 Fixed 5.33 429
INSKT 2015-1 A Consumer Prosper INSKT Insikt 31-Mar-15 4.31 n/a 3.7 n/a Fixed 4.00 396
BLT 2015-1 A Consumer Prosper BLT Blue Elephant 25-Mar-15 60.90 n/a 55.0 0.96 Fixed 3.12 275
BLT 2015-1 B Consumer Prosper BLT Blue Elephant 25-Mar-15 60.90 n/a 8.9 2.56 Fixed 5.56 475
BLT 2015-1 C Consumer Prosper BLT Blue Elephant 25-Mar-15 60.90 n/a 3.6 n/a Fixed 0.00 n/a
GLCT 2015-A A Consumer Prosper GLCT Garrison 2-Mar-15 190.26 n/a 154.1 1.52 Fixed 3.96 324
GLCT 2015-A B Consumer Prosper GLCT Garrison 2-Mar-15 190.26 n/a 9.4 1.52 Fixed 5.43 472
GLCT 2015-B A Consumer Prosper GLCT Garrison 2-Mar-15 120.58 n/a 97.4 1.52 Fixed 3.96 324
GLCT 2015-B B Consumer Prosper GLCT Garrison 2-Mar-15 120.58 n/a 5.9 1.52 Fixed 5.43 472
CCOLT 2015-1 A Consumer Prosper CCOLT BlackRock 9-Feb-15 306.71 23.5% 281.3 1.05 Fixed 2.82 240 Baa3 Rated
CCOLT 2015-1 B Consumer Prosper CCOLT BlackRock 9-Feb-15 306.71 11.0% 45.4 2.86 Fixed 5.21 395 Ba3 Rated
SOFI 2015-A A1 Student SoFi SOFI SoFi 29-Jan-15 313.80 n/a 151.5 3.89 Floating 1.72 125 A2 A AA Rated
SOFI 2015-A A2 Student SoFi SOFI SoFi 29-Jan-15 313.80 n/a 162.3 3.47 Fixed 2.42 125 A2 A AA Rated
GLCII 2014-A A Consumer Lending Club GLCII Garrison 29-Dec-14 153.00 n/a 109.8 1.35 Fixed 4.00 355
GLCII 2014-A B Consumer Lending Club GLCII Garrison 29-Dec-14 153.00 n/a 9.5 1.35 Fixed 6.00 555
INSKT 2014-2 A Consumer Prosper INSKT Insikt 22-Dec-14 7.50 n/a 7.1 n/a Fixed 4.00 396
INSKT 2014-2 B Consumer Prosper INSKT Insikt 22-Dec-14 7.50 n/a 0.6 n/a Fixed 9.00 895
SOFI 2014-B A1 Student SoFi SOFI SoFi 10-Nov-14 303.20 n/a 105.7 3.89 Floating 1.77 125 A2 A AAL Rated
SOFI 2014-B A2 Student SoFi SOFI SoFi 10-Nov-14 303.20 n/a 197.5 3.3 Fixed 2.55 130 A2 A AAL Rated
CANF 2014-1A A SME CAN Capital CANF CAN Capital 17-Oct-14 200.02 n/a 171.0 2.9 Fixed 3.12 210 A A Rated
CANF 2014-1A B SME CAN Capital CANF CAN Capital 17-Oct-14 200.02 n/a 20.0 3.4 Fixed 4.26 221 BBB- BBBL Rated
KABB 2014-1RT A22 SME Kabbage KABB Kabbage 25-Sep-14 n/a n/a 575.3 2.56 Floating 3.27 209 A- Rated
KABB 2014-1RT B2A SME Kabbage KABB Kabbage 25-Sep-14 n/a n/a 168.6 2.56 Floating 10.52 907 BB- Rated
KABB 2014-1RT B2B SME Kabbage KABB Kabbage 25-Sep-14 n/a n/a 0.0 2.56 Fixed 3.00 192 BB- Rated
KABB 2014-1RT B2C SME Kabbage KABB Kabbage 25-Sep-14 n/a n/a 21.1 2.56 Floating 13.52 1,234 B+ Rated
GARST 2014-A A Consumer Prosper GARST Garrison 18-Jul-14 45.54 n/a 36.9 1.52 Fixed 3.00 233
GARST 2014-A B Consumer Prosper GARST Garrison 18-Jul-14 45.54 n/a 2.3 1.52 Fixed 4.00 333
SOFI 2014-A A1 Student SoFi SOFI SoFi 14-Jul-14 280.69 n/a 125.5 3.69 Floating 2.12 160 A A Rated
SOFI 2014-A A2 Student SoFi SOFI SoFi 14-Jul-14 280.69 n/a 125.5 3.72 Fixed 3.02 165 A A Rated

 

Ticker Type Originator Shelf Issuer Issue Date Collat Amt Credit Amt ($mm) Initial WAL Coupon Initial Est. Moodys   S&P DBRS   Fitch    Kroll Rated
($mm) Support (%) (yrs) Type Coupon Pricing
GLCT 2014-A A Consumer Prosper GLCT Garrison 2-Jul-14 169.21 n/a 147.6 1.53 Fixed 3.00 253
GLCT 2014-A B Consumer Prosper GLCT Garrison 2-Jul-14 169.21 n/a 9.0 1.53 Fixed 4.00 353
INSKT 2014-1 A Consumer Prosper INSKT Insikt 28-May-14 n/a n/a 7.1 n/a Fixed 3.50 345
ONDK 2014-1A A SME OnDeck ONDK OnDeck 8-May-14 183.20 n/a 156.7 2.32 Fixed 3.15 250 BBB Rated
ONDK 2014-1A B SME OnDeck ONDK OnDeck 8-May-14 183.20 n/a 18.3 2.8 Fixed 5.68 477 BB Rated
SOFI 2013-A A Student SoFi SOFI SoFi 23-Dec-13 151.80 n/a 151.8 4.35 Fixed 3.75 245 A Rated
INSKT 2013-2 A Consumer Prosper INSKT Insikt 17-Dec-13 n/a n/a 2.6 n/a Fixed 4.25 421
INSKT 2013-2 B Consumer Prosper INSKT Insikt 17-Dec-13 n/a n/a 0.6 n/a Fixed 11.00 1,096
INSKT 2013-1 A Consumer Prosper INSKT Insikt 4-Oct-13 1.57 n/a 1.1 n/a Fixed 4.50 444
INSKT 2013-1 B Consumer Prosper INSKT Insikt 4-Oct-13 1.57 n/a 0.3 n/a Fixed 12.00 1,197
ECLT 2013-1 A Consumer Lending Club ECLT Eaglewood 26-Sep-13 100.00 n/a 75.0 2.37 Fixed 4.30 371
ECLT 2013-1 B Consumer Lending Club ECLT Eaglewood 26-Sep-13 100.00 n/a 24.0 2.44 Fixed 8.00 739

About the author: PeerIQ offers portfolio monitoring and loan surveillance, structured finance analytics, third-party reporting, pricing and valuation and advisory services across both whole loans and ABS products.

Disclosures Section

This document is for general information and for the purposes of facilitating a discussion only, and is not intended, and does not, constitute a recommendation or offer to sell, or solicitation of any offer to buy, securities, or any other financial instrument, or a solicitation for any other action of the recipient. PeerIQ (the “Company”) disclaims any and all liability relating to a decision based on or for reliance on this document. The information, estimates, forecasts or opinions included in this document are supplied for your private use and information, and are for discussion purposes only. The information contained herein shall not be deemed to constitute investment advice and should not be relied upon as the basis for a decision to enter into any transaction now or in the future. By providing this document, the Company is not acting and shall not be deemed to be acting as an investment adviser. Any person considering an investment should seek independent advice on the suitability of the particular investment and should (i) consult their financial, accounting, tax and legal advisors prior to any investment; and (ii) inform themselves as to (a) the appropriateness of said investment, (b) the legal requirements within their own jurisdictions for the purchase or holding of said investment, (c) any foreign exchange restrictions which may affect them, and (d) the income and other tax consequences which may apply in their own jurisdictions relevant to the purchase, holding or disposal of any securities acquired as a result of such an investment. The information provided in this document does not constitute, and may not be used for the purposes of, an offer to sell or the solicitation of an offer to buy shares of any security of the Company or any affiliate.

The Company makes no representation or warranty, express or implied, as to, or assumes any liability responsibility for, the accuracy, reliability or completeness of any information whatsoever contained herein, including without limitation any information supplied directly by the Company, any information supplied by third parties and included herein, and any information, estimates, forecasts or opinions prepared on the basis of any of the foregoing. The Company shall not be in any way responsible or assume any liability for any act or omission made by any person in reliance on this document or any information contained herein. Although some information herein has been provided by the Company, the information herein is based on information furnished by third parties, the accuracy and completeness of which has not been verified by the Company or any other person. These materials may also contain historical market data; however, historical market trends are not reliable indicators of future market behavior. Any historical investment results of any person or entity described in this material are not indicative of the future investment results. Such results are intended only to give potential investors information concerning the general experience of the relevant person or entity are not intended as a representation or warranty by the Company or any other person or entity as to the actual composition of or performance of any future investments or other financially-related indicators.

This report is provided subject to the terms and conditions of any agreement that the clients may have entered into with the Company. The information is private and confidential and for the use of the clients only. For the sake of protection to persons or investors other than the clients where the former are not authorized to receive this report, this report must not be reproduced in whole or in part by any means except for the personal reference of the clients. No part of this material may be reproduced, distributed or transmitted or otherwise made available without prior consent of the Company. Additionally, the content, data and information presented in this report is expressly protected under and subject to U.S. copyright law, with all rights arising thereunder vesting in the Company. The trademarks and service marks contained herein are the property of their respective owners. Any unauthorized use or disclosure is strictly prohibited. The Company may pursue legal action if the unauthorized use results in any defamation and/or reputational risk to the Company.

PeerIQ

19 West 24th Street

3rd Floor

New York, NY 10010

Tel. +1 (646) 694-8004

www.peeriq.com

Tuesday October 25 2016, Daily News Digest

brexit investors

News Comments Today’s main news: ID Analytics, a new credit bureau created by Lending Club, Prosper, and Marlette. CFPB come out with a report to encourage fintechs. Today’s main analysis : The UK faces a huge test in the wake of Brexit. Today’s thought-provoking articles: How venture capitalists vet deals with crowdfunding. Canada gets its first FinTech […]

brexit investors

News Comments

United States

  • New online lending network promises to protect consumers and businesses. AT: “Following the news of OnDeck leading the way on price comparison and several online lenders cooperating to kick off a marketplace lending association, here is more evidence that online lending is trying hard to keep regulators off their backs. It’s another positive sign of growth and respectability for the industry. My only concern is that it could get out of hand with too many competing self-regulatory attempts.” GP : ” One needs to make the difference between SMART Box and ID Analytics clear : SMART box allows SME borrowers to compare the cost of capital between lenders with a standard method. ID Analytics is perhaps very close to being a credit bureau where Lending Club, Prosper, and Marlette contribute information to prevent loan stacking. If I were them I would certainly expect the regulators to name ID Analytics a credit bureau.”
  • CFPB assesses FinTech as positive. GP ” Like all regulators, CFPB has its detractors and its proponents. CFPB courageously came out encouraging “firms focused on giving credit to access the roughly 45 million consumers with little-or-no credit history by using alternative measures”. The agency also discourages “deceptive, harmful and discriminatory behavior”. It’s hard to disagree with that. While some behavior is clearly over the line, the main issue is to identify a clear method on what is close to the line. For example, if one offers auto loans, and most people buying cars are man, is that discriminatory ? I heard of a company who offers wedding loans, and most people taking them were of a certain ethnicity. Is that discriminatory ? Is that cultural ? Should we shut down that company ? Does it discriminate against people who are planning to never get married ? “
  • How venture capitalists use crowdfunding as a way to vet deals. AT: “Not only is it effective, but it should be encouraged. There’s got to be a way to narrow the prospects for the capital backers. Crowdfunding is a terrific vehicle.” GP: ” With one limitation. Crowdfunding works great for B2C products, not so much for B2B. Also, there is a large tendance to over promise, do an outstanding crowd sale, and make it impossible to deliver. The laws of physics seem to be hard to change no matter how much money one has. Also, and I learned a lot from Lampix and the Highway 1 accelerator, the hardware is slow and most crowdfunding sites are for hardware devices. “
  • Charlotte, NC has its own FinTech accelerator. AT: “If a city the size of Charlotte make the news for this kind of innovation, then who can argue that FinTech is destined to be a major wave of progression?”
  • BoA “hires” a robot to give financial advice. AT: “While I’m all for innovation in the banking sector, I can’t help but wonder how many consumers will actually want financial advice from a bot over the phone.”
  • Fundrise owes a lot to the success of its REITs to Title III of the JOBS Act. AT: “And not just Fundrise, the entire industry owes a debt of gratitude to the president for signing it.”
  • Lantern Credit goes after the underserved in lending. AT: “If there is any way to move the financial services industry forward, it’s wrapping our arms around the underserved.”
  • Bad debts drive CircleBack out of lending. AT: “How much more will follow? Perhaps the online lending sector needs to adopt better vetting practice for borrowers. This is why an online lending network is necessary.”
  • Bizfi gets a veteran payments administrator as CEO.

United Kingdom

Canada

European Union

Australia

India

Asia

News Summary

 

United States

ID Analytics Announces the Online Lending Network to Help Protect Consumers and Businesses (Yahoo! Sports), Rated: AAA

ID Analytics LLC, a company in consumer risk management, today announced the launch of the Online Lending Network, a new consortium formed to enhance responsible lending, help protect consumers and businesses, and address credit and fraud risks. Founding members include Lending Club, Prosper Marketplace, and Marlette Funding, as well as lenders representing online, marketplace, specialty finance and social lending. The network has achieved significant coverage of prime and sub-prime lending in only a few months, including over two-thirds of marketplace lending activity.

Through the Online Lending Network, lenders report when a consumer requests an offer for a loan product, submits a loan application, or when a loan is funded. In return, the lender receives information on whether that consumer has either requested other loan offers or applied for loans elsewhere in the days, hours or minutes before. The near real-time nature of the response makes high-velocity fraud, like loan stacking, very difficult. It also has the potential to protect authentic consumers from overextending their credit capacity to facilitate responsible lending.

The Online Lending Network will also provide access to tools to evaluate credit, including the detection of synthetic identities, and detection of potential identity theft, as online lenders are a target for fraudsters using stolen identities.

CFPB Gives Upbeat Assessment of Fintech in ‘Project Catalyst’ Report (The Wall Street Journal), Rated: AAA

The federal consumer finance regulator released a report Monday on consumer-friendly financial-technology products, marking the agency’s first overview of the rapidly expanding industry.

The report covers the work the Consumer Financial Protection Bureau has done on its “Project Catalyst,” which aims to encourage the development of innovative consumer financial products that meet regulatory requirements.

The CFPB outlined in its report the types of fintech products and services that it would encourage. In particular, the agency is looking at firms focused on giving credit access to roughly 45 million consumers with little-or-no credit history by using alternative measures. The agency is also looking at firms that provide better technology for mortgage servicing, digital disclosures, credit reporting, and products that help consumers refinance student loans and manage cash flows through access to their wages.

The report also came with several broad warnings to fintech firms about creating products that are harmful, deceptive or discriminatory. The CFPB noted that both banks and nonbank fintech firms should be held to the same rules and oversight—a topic driving much debate among consumer groups, who want fintech firms to adhere to the same rules that apply to banks, and some in the industry who don’t want sweeping regulation.

How VCs are Using Crowdfunding to Vet Deals (VC-List), Rated: A

The crowdfunding industry is growing at an incredible rate, allowing startups and small businesses to launch more crowdfunding campaigns than ever before. Entrepreneurs from all types of industries have leveraged the opportunities that crowdfunding offers to raise much-needed capital for their companies. As such, some VCs have begun to embrace crowdfunding as a new source of deal flow that allows them to vet deals much quicker than in days past.

Crowdfunding platforms not only provide VCs with efficient instruments to review deals and maintain communication with entrepreneurs, it also provides them with the additional deal flow. It gives them the ability to look at more deals in more geographically disparate locations and invest. VCs can review business plans, proforma financials, disclosures and other documentation without having to listen to a glossy sales pitch. They are then able to ask crucial questions of the entrepreneur seeking funding.

Crowdfunding also helps the class of VCs and other investors that don’t have staff dedicated to sourcing projects, and when entrepreneurs approach this class of investor, they are more likely to get a more personal and direct response, rather than be vetted by staff that are not likely to be as knowledgeable as the investors who make the final decisions.

Crowdfunding, while still a relatively young industry, is proving itself as a valued partner to the VC community. As it continues to grow, we will likely see much more interaction between the two industries.

Queen City Fintech looks for 2017 class as Charlotte’s financial tech scene grows (Charlotte Business Journal), Rated: A

Queen City Fintech, the accelerator program based in uptown, is currently accepting applications for its 2017 cohort.

The program has gained support from major financial firms since launching in 2011. Companies including Bank of America, Wells Fargo, Ally Bank, Synchrony Financial, BB&T, Barings and Ernst & Young see value in investing in an accelerator for the financial technology space.

Charlotte has also made strides in the fintech space as a city, which makes the program more appealing to entrepreneurs around the world.

Bank of America’s Bot Will Spout Financial Advice Through Your Phone (Fortune), Rated: B

Bank of America plans to provide customers with a chatty “virtual assistant” named Erica who will use artificial intelligence to make suggestions over mobile phones for improving their financial affairs.

Michelle Moore, head of digital banking for Bank of America, said in an interview on Monday that Erica will be smarter than a robot because she will bring up topics on her own, using predictive analytics as opposed to only answering questions customers ask.

Erica will be introduced to customers late next year, and will be able to converse by text as well as voice, said Moore.

How Title III of the JOBS Act helped Fundrise ‘democratize real estate’ (Technical.ly), Rated: A

When Dupont-based Fundrise first launched in 2012, the company’s mission was to “democratize” real estate investing — to “give everyone the opportunity to invest directly in high-quality real estate.”

The company’s tech-driven model allowed for a significant departure from the old school methods of real estate investing, but there was a rub — Fundrise’s democracy had imposed legal limits. That’s because, back in 2012, Fundrise couldn’t actually give “everyone” the same investment opportunity. Under the SEC rules of the time, any individual investing with Fundrise needed to be an “accredited investor” — an individual with a net worth of $1 million or $200,000 in annual income. That’s a pretty limited democracy.

But even back in 2012 this was starting to change. That year President Barack Obamasigned the JOBS Act, Title III of which opens up equity crowdfunding to non-accredited investors. And finally, on May 16, 2016, that section of the Act was implemented by the SEC.

There are still some limitations, though. For example, each Real Estate Investment Trust (REIT or eREIT as Fundrise calls them) that the company sets up has a $50 million cap. According to Davis, demand is much higher than this.

Lantern Credit CEO Chad Swensen on Enabling Lending to the Underserved Consumer at Money20/20 (Businesswire), Rated: A

Large segments of the US population are unable to access mainstream credit offer for various reasons. Lending to those underserved segments requires specialized credit risk assessment and management. As banks try to expand access to credit to underserved borrowers, they are turning to innovative technologies to meet the financial needs of more people.

Lantern Credit is using machine learning real-time credit modeling and education to enable consumers to gain better control over their finances and improve their credit wellness. The Company is partnering with lenders and retailers to predict credit worthiness of consumers with greater precision and to facilitate improved matching between credit products and interested customers.

Bad Debts Trigger Online Lender To Stop Dealing (iExpats), Rated: A

Ripples of fear are spreading across online peer to peer lending and crowdfunding platforms as more signs of failing investments become public.

The latest victim is the US online lending platform CircleBack.

The firm has ceased lending as cash from investors dried up on reports of borrowers defaulting on their loan repayments.

The business model was to borrow funds from equity investors that were then loaned to US consumers at interest rates ranging from 6.6% to 35%.

However, investors were concerned that losses were running at 13.5%.

Another concern is crowdfunding equity valuations.

Bizfi Appoints Alternative Finance and Payments Veteran John Donovan as CEO (Yahoo! Finance), Rated: B

Bizfi (www.bizfi.com), a leading fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced its board of directors has appointed John Donovan as the Company’s chief executive officer (CEO). Donovan is a 30-year veteran in the payments and alternative finance industry serving both small businesses and consumers.

United Kingdom

Brexit Confronts U.K.’s Online Lenders With Biggest Test Yet (Bloomberg), Rated: AAA

British peer-to-peer lenders were preparing for serious trouble even before the Brexit vote rocked the U.K. on June 23.

Funding Circle Ltd., the No. 1 online lender to small and medium-sized businesses, carried out a stress test envisioning a three-year recession beginning in January 2017 that would crater the property market. If the U.K.’s split from the European Union wreaks that type of havoc, investors in the platform’s loans should still pocket a net return of 6.4 percent, says Jerome Le Luel, the firm’s chief risk officer. That’s not far off the 7.2 percent the loans should generate without a crisis.

The debate shows the tension at play as the industry, which accounts for just 3.6 percent of total lending to small businesses and consumers in Britain, tries to move into the mainstream. First developed 11 years ago by Zopa, the model has taken off around the world: Global peer-to-peer loan volume is projected to hit almost $350 billion this year, a 12-fold increase since 2013, according to research firm AltFi Data Ltd.

The fallout from the Brexit vote isn’t the only source of uncertainty facing the industry. After more than a year of review, the FCA has yet to clear the way for Funding Circle, Zopa, and other big platforms to tap a deep well of new customers: the government’s Individual Savings Account program. Millions of savers use so-called ISAs to manage assets worth 518 billion pounds.

Meanwhile, Philp, the member of Parliament, is pushing for changes that could upend the industry’s economics. He’s asked Andrew Bailey, the head of the FCA, to consider requiring peer-to-peer lenders to invest their own capital as a portion of every loan they arrange for investors.

Policy makers keen to stimulate economic growth are embracing the approach. The week of the EU referendum, the bloc’s European Investment Bank started distributing 100 million pounds in loans to British small businesses through Funding Circle’s platform. The firm was hopeful it would be the first tranche of a recurring program. Now, due to Brexit, it’s probably a one-off.

At first blush, Brexit hasn’t frightened off investors. In September, British platforms originated a record 364 million pounds in loans, a 30 percent jump over September 2015.

Brexit feeds into more European commercial real estate investment numbers (FTSE Global Markets), Rated: A

As £1.4bn has been pulled from UK property funds post Brexit, a new study from BrickVest says 21% of respondents both Dublin and Hamburg as top European cities; while 16% selected Frankfurt, highlighting a new trend towards German commercial real estate.

Some 40% of the top ten voted European cities were German, compared with 38% of institutional real estate investors who cite London as the top European city to invest in commercial real estate, ahead of Berlin (36%), Munich (31%) and Paris (22%).  Even so, real estate investment platform, BrickVest’s research showed that three in ten (30%) institutional investors believe Brexit will either increase or significantly increase European commercial real estate investment opportunities. A further one in four (23%) institutional investors believe that Brexit will have no impact on commercial real estate investment opportunities.

The research did, however, highlight some concern regarding the illiquidity of commercial real estate investing. Three-fifths (61%) of respondents do not believe that in light of £1.4bn being pulled from UK property funds post Brexit, real estate investors have enough access to a secondary property investment market.

In light of Brexit, which European cities are you currently looking at/planning to look at for commercial real estate investment? (survey with 96 investors)

 

London

38%
Berlin 36%
Munich 31%
Paris 22%
Dublin 21%
Hamburg 21%
Frankfurt 16%
Barcelona 11%
Zurich 11%
Amsterdam 10%
Brussels 10%
Copenhagen 10%
Warsaw 5%
Milan 4%
Madrid 3%
Stockholm

1%

Bruce Davis, MD of Abundance, Shares Insight & Perspective on FCA Regulatory Review (Crowdfund Insider), Rated: A

The UK has been heralded as the gold-standard of regulatory policy regarding crowdfunding, peer to peer lending and Fintech in general. Many countries have studied the approach established by the Financial Conduct Authority (FCA) before enacting rules of their own.

Today, the FCA is in the midst of a scheduled post-implementation review of the crowdfunding market and regulatory framework.  The agency has published a paper explaining their thoughts and perspective on how disruptive finance has evolved alongside some of their concerns.

Bruce Davis: The FCA made great efforts to consult the industry in the process of developing the regulatory framework for crowdfunding in 2014.

At an individual level, the sector is supervised by a flexible team within the FCA who cover issues as and when they arise. We believe that this level of supervision is sufficient for the risks within the industry although we would like to see a greater emphasis on enforcement of rules against businesses which are adjacent to our sector or operating under an exemption.

Bruce Davis: Aside from the odd ‘off the cuff’ comment, we have found the FCA takes its responsibilities to foster competition and innovation seriously. It could still do more to encourage innovations which will encourage more people to take control of their money and how it is invested.

Bruce Davis: I think that pound for pound the crowdfunding industry is perhaps the most supervised sector in the whole financial services industry. Our track record of customer satisfaction and low levels of complaints suggests that this could be scaled back and more focus put on enforcement of the rules against those who operate outside of our regulated sector (but who still offer investments to the public under exemptions or old assumptions about the permissions surrounding an offer of investments to the public).

Canada

OSC Launches Canada’s First Regulatory Sandbox for Fintech (Finance Magnates), Rated: AAA

The Ontario Securities Commission (OSC), one of the thirteen provincial financial regulators in Canada, today unveiled a new fintech-focused hub called LaunchPad which aims to help guide FinTech startups through the complexities of the regulatory framework.

LaunchPad will be staffed by a dedicated team who will work directly with fintech companies to help them navigate, and even potentially tailor, Ontario’s securities laws while ensuring investors remain protected.

The OSC will apply what it learns through the LaunchPad hub more broadly to modernize regulation for similar businesses. These include online advisory firms, peer-to-peer lending services, crowdfunding platforms and angel investor organizations.

The program has a dedicated website, which can be accessed through www.osclaunchpad.ca, and already accepting now requests for support from eligible fintech businesses.

Lending Loop reopens peer-to-peer lending after regulator OK (WHBL), Rated: A

Canadian financial technology startup Lending Loop said on Monday it was re-launching its online lending marketplace after receiving regulator approval to sell investment opportunities to lenders regardless of their wealth.

The company, which paused its unlicensed operation in March, said the Ontario Securities Commission has now granted it an exempt market dealer license, and that it can connect small businesses looking to raise capital to individual lenders seeking a return on capital everywhere in Canada except Quebec.

The approval, which follows a rival company’s green light last month, suggests Canadian regulators are coming to terms with the peer-to-peer lending model, which is already popular in the United States, Europe and elsewhere.

The company will allow borrowers – typically small and medium-sized businesses – to seek loans of between C$5,000 and C$500,000 and over durations ranging from 3 months to 5 years.

Rival Lendified Holdings Inc and its Vault Circle Inc subsidiary secured an exempt market dealer license on Sept. 28. It plans to present lending opportunities only to accredited investors, who must have significant financial assets when it launches in the first quarter of 2017.

European Union

Post Brexit: Bondora Plans European Office in Germany Instead of London (P2P-Banking), Rated: A

Estonian p2p lending marketplace Bondora will open a new European office in Germany, saying that post Brexit London is no longer attractive as a Fintech hub. Bondora formerly planned to move to London but stopped the plan after the Brexit vote. ‘There is too much uncertainty, the UK lost its attractiveness as a fintech hub’ explains Bondora CEO Pärtel Tomberg the decision.

For the Bondora business model very good access to the European market is crucial says Tomberg. He sees uncertainty how long London might be able to provide this.

P2P Lending Won’t Displace Banks; Dealing with Credit Risk Management (Fintech News Switzerland), Rated: A

Peer-to-peer lending, which aims at shaking up the banking market and attacking one of the core profit-generating activities of banks, is not likely to displace banks from their core roles of lending to retail consumers, according to a report by Deloitte.
Despite the promising outlook, the P2P lending industry has recently come under fire as Renaud Laplanche, CEO of Lending Club, one of the leading platforms in the US, was forced to resigned after the company revealed that it had provided mis-assessed loans to Jefferies and Co., which was distributing the loans to institutional investors, reports the Wall Street Daily.

The skepticism over P2P lending has also been felt in China where loan sharks have been widely criticized for practicing aggressive debt recovery tactics, demanding, for instance, nude photos as collateral from female borrowers for blackmail if they fall behind on their repayments, reports the Financial Times. Other disturbing debt recovery tactics in China include property destruction and bodily injury.

While P2P lending has enabled the masses to gain access to credit and investment opportunities in China, the sector has nevertheless a Wild West aspect with lenders reportedly peeking in bathrooms in order to assess credit risks and borrowers settling payment obligations with bottles of spirits.

Yet, P2P lending remains a risky bet compared to other savings and investment options, according to Deloitte. However, it highly depends on the market. Switzerland seems to be a very attractive destination. The country is known to be very reliable and strict in credit-Risk Management and investors can get attractive yields with the likes of CreditGate24 and others.

Australia

Bravura Solutions chief: fintech doesn’t need to go abroad to be successful (Australian Financial Review), Rated: A

Bravura Solutions is proof that fintech is one of Australia’s unheralded export successes. At least that’s the view of chief executive Tony Klim, who says his company’s return to the ranks of the ASX will show it is possible to build an internationally successful fintech business based in Australia.

Bravura, which is in the midst of a $200 million, pre-Christmas share sale, provides software and technology services for superannuation, life insurance, and private wealth firms. It administers about $2.3 trillion of assets for clients including Bank of New York Mellon, JPMorgan, Mercer, Fidelity, and Citigroup.

The initial public offering for the company, backed by local private equity firm Ironbridge, is Bravura’s second attempt at life on the ASX, coming a decade after it first floated on the exchange as a two-year-old business focused on the British and Asian markets.

One of the biggest differences between then and now, Klim says, is that Australia is much more focused on technology, as the commodities boom that has powered the national economy for decades fades and the government attempts to identify and help develop other sectors that may one day take the place of mining.

While fintech firms operating in consumer niches such as peer-to-peer loans have captured the imagination of the media and investors alike, Klim proudly says Bravura has been profitable by focusing on less sexy stuff.

9 Australian companies have made it to the latest global Fintech 100 (Business Insider), Rated: B

Nine Australian companies are in the global 2016 Fintech 100.

The latest annual list, compiled by accelerator H2 Ventures and KPMG, includes Prospa (31), Tyro (43) and SocietyOne (50) among the leading 50 established fintech companies.

Another six are in the 50 emerging stars list: Afterpay, Brighte, Data Republic, Identitii, Hashching and Spriggy.

India

Our take: as Fintech firms allowed 100% FDI through automatic route, challenges for regulators (Medianama), Rated: A

Fintech companies classified under “other financial services” will now be permitted 100% foreign direct investment (FDI) through the automatic route, as opposed to the approval route earlier, according to a Reserve Bank of India (RBI) notification.

The RBI and other regulatory authorities have an uphill task of trying to figure out which fintech companies fall under whose purview. Regulators will have to spell out explicit rules and come out with more detailed classification. Fintech companies operate in areas where regulation in unclear, and regulators need to update themselves on their activities and specify  what a particular company can and cannot do.

A great example of this was the RBI’s consultation paper the peer-to-peer (P2P) lending companies which sought to regulate them as NBFCs. It added that it took into consideration SEBI’s guidelines on crowd funding, and clarified that since P2P lending it is not a transaction where equity or debt is exchanged, it would come under the RBI’s ambit.

The RBI’s review of guidelines for prepaid payment instruments (PPIs) is welcome and it will be in the interest of everyone to understand new developments in the fintech space. Other regulators would be wise to issue or clarify rules for developments in their sectors.

Asia

P2P lending rises in Korea in Q3 (Korea Herald), Rated: A

Peer-to-peer lending in South Korea rapidly grew in the third quarter, reaching 188 billion won (US$166 million), according to the data compiled by industry tracker Crowd Institute.

Local banks shunned lending to such small businesses amid a protracted economic slowdown, but for investors hunting for high returns, P2P lending emerged as an alternative investment tool amid record low-interest rates in Asia‘s fourth-largest economy.

The alternative lending service has gained popularity in the past few years, with accumulated P2P loans reaching over 150 billion won as of June this year, and the figure is expected to top 300 billion won by the end of the year.

Overcoming challenges: Building a strong and sustainable fintech sector (Business Times), Rated: A

While fintech holds great promise for the society with key benefits being cost-effectiveness, efficiency, and exceptional user experience, it is still a fairly nascent sector. As with all industries that are developing rapidly, there are growing pains and issues to be ironed out, especially those surrounding corporate governance and regulatory requirements.

Singapore has been proactively addressing the subject with the Monetary Authority of Singapore (MAS) setting up a fintech and Innovation Group in 2015 to examine regulatory policies and sector development strategies.

Besides online lending, cryptocurrencies such as bitcoin have also had their fair share of issues. Bitcoin famously vouched to give a bank account to anyone without requiring identity verification. While the process becomes more seamless, the anonymity of it may expose it to vulnerabilities. In August this year, hackers stole US$65 million worth of bitcoins from bitcoin exchange Bitfinex and in 2014, US$460 million of bitcoins vanished from Mt Gox, the world’s largest bitcoin exchange before it declared bankruptcy after the hack. Incidents such as these are a cause for concern, but it is important to keep in mind that they are rare and far between. These scandals expose the gaps in the sector and provide a valuable learning experience.

In Singapore, the MAS has set up a regulatory sandbox to allow startups to experiment with fintech solutions within a well-defined space and duration. For that period, the MAS will ease certain regulatory requirements and provide appropriate safeguards to contain the consequences of failure for customers. Other countries such as Thailand, Australia, the UK, and Malaysia are also implementing their own versions of a regulatory sandbox to develop a safe and conducive sector where innovation has the space to flourish.

As with every worthy endeavor, growing pains are an inevitable part of the process. With the government’s active involvement in the sector, Singapore is in a good position to learn from experience and embrace change instead of being hampered by short-term challenges.

Authors:

George Popescu
Allen Taylor

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu