February 12, 2016
PUBLISHED BY Wildcat Venture Partners
SOURCE Wall Street Journal
Credit fears are swirling around banks, but investors are still betting Harvard grads are a good bet to pay back their student loans.
Online student lender Earnest Inc. this week completed its first sale of a package of loans, $112 million worth, to big institutional investors, including real-estate investment trust Western Asset Mortgage Capital Corp. The highest class of notes received an A rating from credit rating firm DBRS Inc.
Earnest also inked a deal in recent weeks with Goldman Sachs Group Inc. to provide a $150 million credit line to fund loans until they are packaged and re-sold as securitizations.
Securitization of online loans soared last year, to more than $8.4 billion according to data provider PeerIQ, but had halted since mid-December as investor anxiety rose on subjects ranging from China to oil to Federal Reserve interest-rate targets.
Earnest’s is the first securitization completed this year by an online lender. The deal follows the sale of a portfolio of Lending Club loans at a premium to the balance owed. Avant Inc., a Chicago-based lender, is also currently shopping $300 million worth of its own online loans.
Earnest has lent out over $500 million since launching in 2014, and mostly refinances existing student loans and offers features to borrowers like the ability to delay a payment or switch from fixed to floating interest rates.
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