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Securitization in Marketplace Lending Slowed in Q4 2018

Issuance in Q4 2018 totaled $2.6 billion, the slowest pace of issuance in 5 quarters.

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Up until now the marketplace lending securitization space has been on a tear. We share PeerIQ’s detailed securitization reports every quarter and for over a year we have discussed record or near record issuance from the top lenders in the marketplace lending space. Deals have been getting larger and a few new companies have joined in the mix over the last several quarters. In Q4 2018, we saw a pretty stark reversal of this trend as PeerIQ released their most recent report.

Issuance totaled $2.6 billion, which is the slowest pace of issuance in 5 quarters and was related to market volatility according to PeerIQ. Volume decreased 44% from the prior year period and dropped 25% quarter over quarter. Total issuance in 2018 was $15.3 billion and included newer issuers Upgrade and Enova. PeerIQ expects that Upgrade and Enova will continue to participate in the securitization market going forward. While Q4 represented a drop in deals, cumulative issuance still stands at $44.5 billion across 142 deals which is a significant amount.

Another reversal from the previous quarter were that spreads widened and yields increased on new issuances. Below PeerIQ shares the deals issued in the quarter.

SoFi continues to lead in total origination volume over the past 2 years. Many familiar names in the marketplace lending space round out the top 10 list. We should also point out that LendingClub sold more than $1 billion in CLUB certficates in 2018 which likely reduced their securitization volume in 2018.

Beyond tracking the actual deals getting issued, the ratings agencies involved and the lead-managers, PeerIQ also provides their macro view of the economy. There are many moving pieces with the economy growing, inflation rising and the fed increasing rates. However, while the economic indicators are positive PeerIQ noted that the capital markets shared a different story in 2018 as we saw the stock market decline in late 2018. The US yield curve also inverted which in the past has predicted recessions despite the actual timing not being precise. If you want to learn more about PeerIQ’s unique perspective on the securitization space as well as their economic outlook you can download their recent report on their website for free.

PeerIQ’s Q4 2018 Lending Earnings Insights Report

PeerIQ's latest Lending Earnings Insights Report points to a strong economy but bank and card issuer CEOs are cautious about being late in the credit cycle.

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PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

The report covers earnings reports from big banks and fintech lenders. Stock performance was mixed with the flattening yield curve causing banks and card issuer stocks in particular to suffer. Companies covered include Enova, LendingClub, One Main Financial, OnDeck, GreenSky, Bank of America, Citibank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Wells Fargo, Capital One, Discover, Synchrony and American Express.

One of the growing trends has been the pull back by banks lending directly to consumers and small businesses. Banks are instead increasing funding lines to non bank lenders, credit facility volume has grown 6x since 2010. The growth in originations from non bank lenders has forced regulators to look at them more closely, while the FDIC is considering granting ILC charters to non banks.

Broadly across the credit spectrum fintech lenders have seen delinquencies and charge offs remain at near record lows. All the companies in this segment saw double digit revenue and origination growth YoY. Lenders have started to raised borrowing rates, though not at the same pace as the Fed Funds Rate. The flattening yield curve has raised the cost of borrowing on credit facilities, causing margins for lenders and investors to be compressed.

Big banks experienced another strong earnings quarter as all covered in the report saw double digit increase in earnings. Revenue drivers vary from bank type to bank type. Big banks covered within the report saw deposits rise due to a better digital banking experience, an integration between wealth and banking products and a retail branch expansion. As a group the banks are growing, albeit slower than in the past, through digital means and are focused on the long term potential of products they are currently building.

Credit card issuers all saw their earnings grow by more than 20 percent YoY. Most card issuers also saw growth in revenue and their loan books. Growth in total allowances for losses outpaced loan growth, pointing to the fact that most card issuers see a credit normalization coming. Card issuers have used the partnership model with stores like Walmart, JC Penney and Lowes to grow revenues.

Overall economic health, low delinquencies and low charge offs show that the credit space is doing quite well. Though the report points out that most of these companies do not expect this environment to last forever, they are in the midst of preparing for a change while they keep growth humming along.

PeerIQ Releases Their Marketplace Lending Securitization Tracker For Q1 2018

We see another robust quarter for marketplace lending securitizations with $4.3 billion in new deals

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Securitization continues to grow for the marketplace lending sector. As they do at this time every quarter PeerIQ released their Securitization Tracker today. It showed another strong quarter with $4.3 billion of total issuance. This total was up 34% from Q1 2017 but down slightly from the record total in Q4 2017.

The cumulative total of all marketplace lending securitizations to date is now $33.4 billion across 114 deals as demonstrated in the above graphic.

SoFi lead the way again with $2.6 billion or around 60% of the market with two huge student loan deals and a consumer loan deal. Regardless of the challenges they have had over the past year they have continued to execute very well on the securitization front. Below is the league table for 2017 and Q1 2018 for the marketplace lending sector.

Here are some of the other findings from this quarter’s report:

  • We observed an unprecedented 21 months of non-stop issuance – Markets remain in a “risk-on” mode and MPL investor appetite continues to grow.
  • Spreads tightened this quarter, amidst rising rates and increased volatility, and we saw deals price at record tights – Average spreads at issuance are tighter in the consumer and student spaces across credit tranches.
  • All deals this quarter were rated – DBRS continues to lead the rating agency league table, while Kroll dominates the unsecured consumer sub-segment and we continue to see increased engagement from the top 3 ratings agencies.
  • Tranches continue to get upgraded – Ratings’ Agencies have upgraded 33 consumer MPL tranches and 51 student MPL tranches so far.
  • Goldman Sachs, Deutsche Bank, and Morgan Stanley continue to top the issuance league tables with over 55% of MPL ABS transaction volume.
  • With the potential for policy error on interest rates, regulation and trade expect a volatile credit environment in 2018.
  • We should also see emerging ABS issuers like Upgrade.

You can download the report for free from the research page at PeerIQ.

Peer IQ Releases Q4 2017 Marketplace Lending Securitization Tracker

Cumulative issuance for marketplace lending securitization now totals $28.2 billion across 106 deals.

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The easiest way to get insight into the marketplace lending securitization market is through PeerIQ’s quarterly reports. It feels like every quarter brings more good news for originators and the fourth quarter of 2017 was no exception.

Issuance in the quarter totaled $4.4 billion, which is another record and represents a 100% increase over Q4 2016. Total issuance is now $28.2 billion and PeerIQ expects issuance to grow by 30% annually to $18 billion in 2018. PeerIQ shares that investor appetite for these securitizations continues to grow.

All deals for the quarter were rated by at least one rating agency. Kroll Bond Rating Agency leads in rating consumer deals while DBRS leads in rating the student lending deals. SoFi continues to impress as they issued the largest consumer and student lending deals ever in marketplace lending. Upstart issued their second securitization and is expected to be an annual issuer. Besides their standard securitizations, LendingClub also completed a whole loan pass through security to a single investor which is listed at the bottom of the below table.

PeerIQ also shares the breakdown of issuance by company across 2016 and 2017. Not surprisingly, we’ve also seen the average deal size increase over the years.

Conclusion

What’s fascinating to me is to think about how far the securitization market has come since the early days of the industry. I still remember back in 2014 when Eaglewood was awarded LendIt’s Innovator of the Year Award for putting together the first securitization in the marketplace lending space the previous year. It’s impressive how robust the market is now and how it has grown in such a short amount of time.

If you’re looking for more details of the securitization market you can download the full report for free on PeerIQ’s website. We also recently interviewed Rosemary Kelley from Kroll Bond Rating Agency on the Lend Academy podcast who shared her perspective on the securitization market.

PeerIQ Releases Marketplace Lending Securitization Tracker Q3 2017

The third quarter report on marketplace lending securitizations is now available from PeerIQ.

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PeerIQ has released their latest marketplace lending securitization report for the third quarter. Total issuance for the quarter was $2.6 billion, down from $3.0 billion in the previous quarter. This represents an increase of 7.6% from the prior year period. Total issuance to date is now $23.8 billion across 96 deals. The breakdown of securitizations by asset class is shown below:

One of the indicators of the maturation of marketplace lending is that for the second quarter in a row all deals were rated. As usual SoFi led the way as far as total volume goes closing two consumer deals and one student loan deal. Both Lending Club and Prosper issued a securitization and College Avenue issued their first ever student loan securitization. This was Lending Club’s first securitization of prime loans, with borrowers having a weighted average FICO of 692.

The below league table shows the top ten originators and total securitizations across 2016 and 2017 to date.

PeerIQ noted several other takeaways for the quarter which are further explained in the report:

  • Credit support requirements remain stable as rating agencies get more comfortable with collateral performance. We see deterioration in credit performance, but investors are well protected due to structural features and senior tranches deleverage rapidly to gain greater protection. Demand remains robust in this sector.
  • In related news, Goldman Sachs purchased $300Mn of solar loans from Mosaic. It would be interesting to see if they would participate in future Mosaic securitizations, as they have in the Marlette transactions.
  • 3Q17 saw a benign macro environment and low volatility. The Fed announced the beginning of its balance sheet reduction program to start in October, and prepared the market for an interest rate hike at the December meeting.

Conclusion

This is just a taste of the information that PeerIQ includes in their reports. Every quarter they do a great job of putting this information together and providing their perspective on the securitization market. You can download the full report on the PeerIQ website.

PeerIQ Reports on Q2 2017 Marketplace Lending Securitizations

Nine securitizations took place in Q2 2017 totaling $3 billion with each deal rated by at least one agency.

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Every quarter PeerIQ releases a Marketplace Lending Securitization Tracker and every quarter there are new developments on the securitization front. Q2 2017 was no exception with nine securitizations taking place totaling $3 billion, a 76% growth over the second quarter of 2016. This is in line with Q1 2017 where issuance was the same, but there were only seven deals. Total issuance is now $21.9 billion across 92 deals.

Other highlights provided by PeerIQ include:

  • Multi-seller club deals and self-sponsored deals have emerged at several leading platforms.  All deals were rated in this quarter, including record-sized consumer deals from SoFi, large multi-seller deals from Marlette and Prosper, and the first self-sponsored, near-prime deals from Lending Club and Upstart.
  • Dealer and rating agency participation continues to intensify. Fitch rated its first Consumer MPL ever, Prosper’s PMIT 2017-1, indicating broadening acceptance across ratings agencies. Goldman Sachs, Morgan Stanley, and Deutsche Bank lead over 47% of MPL ABS transaction volume. Noteworthy is the rising presence of BNP Paribas, which co-managed CLUB 2017-NP1. DBRS leads the rating agency league table, and Kroll dominates the unsecured consumer sub-segment.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.  In Q2 2017, we saw spreads tighten in riskier tranches of consumer ABS, indicating strong investor appetite for MPL ABS paper in the market.
  • Delinquency rates have continued to increase across several verticals—such as subprime auto, student, and personal loans—due to exposure to riskier borrowers, a re-leveraging of consumer balance sheets, “loan stacking,” and shifting payment priority trends.
  • Initial pricing is near record tight levels. Lending Club’s inaugural deal priced at Libor + 110, second only to Marlette’s MFT 2017-1 (L+100) in execution on the Class A bond. Overall, spreads have tightened with greater investor acceptance in an overall “risk on” environment.

[Read more…]

PeerIQ Releases Marketplace Lending Securitization Tracker Q1 2017

PeerIQ released their first quarter update on the marketplace lending securitization market.

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PeerIQ covers marketplace lending securitization in great detail through their weekly newsletters as well as their in depth reports. Today, the company released their Marketplace Lending Securitization Tracker for Q1 2017 which is a 15 page report that provides information on every securitization in the industry. Below we provide an overview of key takeaways from the report.

Total Marketplace Lending Issuance $2.9 Billion in Q1

When we look at loan funding over the last few years both the total deals done and total issuance have steadily increased. Issuance totaled $2.9 billion in Q1 2017, bringing total issuance to $18 billion across 80 deals.

There has been a trend towards rated deals with all deals during the first quarter of 2017 being rated securitizations.

Not surprisingly SoFi continues to lead the way with record-sized consumer deals. SoFi alone represents 51% of deal value of the top 10 originators with just under $9 billion of issuance. The first quarter also brought the first prime deal from Lending Club. [Read more…]

PeerIQ and TransUnion Partner to Provide More Transparency to Marketplace Lending

PeerIQ and TransUnion plan to develop a suite of data transparency solutions for the online lending industry.

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peeriq_transunion_partnership

Today, PeerIQ announced a partnership with information solutions provider TransUnion. PeerIQ is known for its data and analytics capabilities in the marketplace lending industry with a focus on securitizations. The goal with the new partnership is to provide transparency to the online lending industry through a suite of products and TransUnion’s access to originator data will play a big role in that. We spoke to PeerIQ CEO Ram Ahluwalia who said the partnership has been in the works for nearly a year.

According to the press release, they will be building an authoritative data and derived analytics solutions for the industry. While we will have to wait and see exactly what the new products entail it is not difficult to guess where this might be going. All the major credit bureaus receive data from lenders of all kinds including marketplace lenders. With this partnership PeerIQ is likely to have access to this data at least in aggregate form. They will be able to build all kinds of interesting products on top of this TransUnion data.

According to Ram Ahluwalia, CEO of PeerIQ:

Our partnership with TransUnion is a significant milestone for us, and together we intend to tackle the industry’s major challenges. Our clients are demanding through-cycle data histories, robust models and indices, cross asset-class comparisons and consensus valuation. We’re eager to meet those needs by uniting with the best data partner in the space.

To get a better idea of what this partnership means for PeerIQ and TransUnion, PeerIQ provided additional details about the partnership and why it is important.

What does this mean for the PeerIQ?  

We’ve built powerful analytical tools that our clients use to quickly understand and represent their credit risk, but ultimately such tools depend on the quality and scope of the underlying data.  Today, our platform offers insight into over $35B in loans across all major fintech lenders. Our TransUnion partnership affords a step-function change to that data advantage.

For the industry?

The industry needs standardization and transparency to unlock new pools of capital. There is significant variation on data representations. There are no consensus valuation, benchmarks, or loss estimates informed with pre-crisis data. These and other challenges add tremendous friction to the system. With TransUnion’s support, we are tackling these issues head on and introducing products that will reduce these frictions, increase investor confidence, and ultimately improve capital access.

When can we expect new product launches?

TransUnion has been a great partner, and we’re working steadfastly to get our first set of new products to market in early 2017.  Stay tuned.

Conclusion

It’s important to remember that the success of the online lending industry is not reliant solely on the originators. The third party service providers like PeerIQ, TransUnion and others play a critical role in reducing frictions to investing. Investor confidence is crucial to a marketplace lending platform’s success and this partnership will help investors gain more transparency into the loans they are buying and bring new capabilities to the industry as a whole.

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LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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