SoFi Professional Loan Program 2017-A LLC

Transcription

1 Presale: SoFi Professional Loan Program 2017-A LLC This presale report is based on information as of Jan. 31, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Rating(i) Amount (mil. $) Interest rate (%) A-1 AAA (sf) Floating(ii) A-2A AAA (sf) Fixed(ii) A-2B AAA (sf) Fixed(ii) B NR Fixed(ii) C NR Fixed(ii) R certificates NR N/A N/A (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the interest rates will be determined on the pricing date. NR--not rated. N/A--Not applicable. Profile Closing date Feb. 9, Collateral Loan originator, sponsor, seller and administrator Servicer Trustee, underlying trustee and bank provider Underwriters Private student loans. SoFi Lending Corp. MOHELA. Wilmington Trust N.A. Goldman Sachs, Morgan Stanley, and BofA Merrill Lynch. SoFi--Social Finance. MOHELA--Higher Education Loan Authority of the State of Missouri. Primary Credit Analyst: Lyuda Ryabkova, New York (1) ; lyuda.ryabkova@spglobal.com Secondary Contact: John Anglim, New York (1) ; john.anglim@spglobal.com See complete contact list on last page(s) JANUARY 31,

2 Rationale The preliminary 'AAA (sf)' ratings assigned to SoFi Professional Loan Program 2017-A LLC's (SoFi 2017-A's) $ million class A post-graduate loan asset-backed notes reflect our view of: The approximately 23%-24% credit support available (including excess spread), based on our 'AAA' stressed break-even cash flow scenarios. These credit support levels provide coverage of approximately 7.8x-8.0x our expected net loss in the 'AAA' stressed break-even cash flow scenarios. The turbo principal payment trigger was in effect in these break-even scenarios due to our 'AAA' default rate assumption being in excess of 4.0% (see the sixth bullet point below). The pool characteristics, including a weighted average credit score of 764, a weighted average gross income of $170,260, and the weighted average monthly free cash flow of $7,088. Free cash flow, as calculated by SoFi Lending Corp. at the time of loan origination, is defined as the obligor's monthly disposable income after taxes, all of the obligor's debt payments (including student loans), and the obligor's rent estimate based on zip code. All of the above characteristics are reported at the time of loan application. Class A's starting overcollateralization of approximately 16.5%. Class A's overcollateralization is defined as the excess of the asset balance over the class A note balance, divided by the asset balance. The asset balance includes the pool balance and class A-1 and A-2 reserve account balances. The approximately 10.5% class B and C subordination for the class A notes. The class B and C subordination is defined as the class B and C note balance divided by the total note balance. The class B and C notes will receive principal payments only after the class A notes have been paid in full. The transaction's payment structure, which builds overcollateralization for the class A, B, and C notes to the greater of 13.10% of the current adjusted pool balance and $6,900,000 (1.15% of the initial pool balance). The subordinate lockout trigger that accelerates note principal repayments (i.e. a turbo principal payment trigger) if the cumulative default rate exceeds 4.0% of the initial pool balance, or if the rolling six-month average deferment and forbearance rate exceeds 8% of the current pool, or if the outstanding pool balance is less than 10% of the initial pool balance. The timely interest and principal payments made by the final maturity date in the cash flow runs that simulated our 'AAA' rating stress scenarios. A scenario analysis, indicating that under moderately stressful economic conditions (defined as about 2.25x the expected defaults), the preliminary 'AAA (sf)' ratings would not decline more than one rating category in the first year, which is consistent with our credit stability criteria. Detailed loan-level data, which allowed for a more detailed analysis of the obligor characteristics. The servicer's moderately low level of expected servicing intensity given the collateral pool's strength. The servicer, The Higher Education Loan Authority of the State of Missouri (MOHELA), a public instrumentality of the state of Missouri. MOHELA provides full-service private student loan servicing and federal loan servicing for its own student loans and those owned by third parties. Social Finance Inc.'s (SoFi) experienced executive management team, which has knowledge of capital markets, credit and risk management, data analytics, and the regulatory regime surrounding private student loans. While SoFi's original business model relied on accredited alumni and other individual investors to fund its loan originations (a "peer-to-peer" platform), SoFi now primarily funds itself with customary institutional and bank financing. The transaction's legal structure. We also analyzed the following aspects of SoFi's business, which had previously contributed to a rating cap on our JANUARY 31,

3 ratings assigned to the SoFi series 2014-A, 2014-B, 2015-A, and 2015-B transactions: SoFi's operating history and collateral performance: when we rated the SoFi series 2014-A through 2015-B transactions, less than three years of the company's operating history and collateral performance was available. SoFi has now been in existence for over five years. Since its inception in 2011 through Dec. 31, 2016, SoFi has originated over $9.2 billion in refinancing student loans. During this period SoFi has charged off only $5.7 million in aggregate principal amount of its refinancing loans (a default rate of 0.06%). SoFi's warehouse facilities: Since mid-2015, SoFi significantly increased its warehouse facilities. As of Dec. 31, 2016, SoFi had $1.6 billion of borrowing capacity from its private education loan warehouse lenders. SoFi had an additional $2.6 billion of borrowing capacity for its personal loan and mortgage products. SoFi's audited consolidated financial statements: even though SoFi Inc. reported unprofitable operations as of Dec. 31, 2015, the company raised a $1.0 billion in equity in September 2015, bringing its total equity capital to $1.4 billion. Transaction Summary The SoFi 2017-A initial pool consists of approximately $ million in private student loans (principal plus accrued interest to be capitalized, calculated as of Jan. 3, 2017). Principal payments received on the initial pool between Jan. 3, 2017, and the last business day before the closing date will be used to purchase additional student loans for the SoFi 2017-A pool on the closing date. The additional student loans will be selected based on the eligibility criteria designed to preserve the initial credit quality of the pool. Loans in the SoFi 2017-A pool are not guaranteed or reinsured under the Federal Family Education Loan Program (FFELP) or any other federal student loan program. The sponsor originated these loans under its SoFi Loan Program. The SoFi 2017-A transaction incorporates the following structural features: The senior notes include one senior floating-rate note class indexed to one-month LIBOR (class A-1), and two senior fixed-rate note class (class A-2A and A-2B). The class A-1 notes are primarily secured by the variable-rate portfolio loans, and both class A-2 notes are primarily secured by the fixed-rate portfolio loans. Any amount to be distributed as principal of the class A-2 notes will be payable first to the class A-2A notes, until the class A-2A notes have been paid in full, and then to the class A-2B notes, except if a subordinate lockout is in effect on or after July 25, 2017; such amounts will be payable to all holders of the class A-2 notes pro rata, based on the principal amounts of the class A-2 notes. Prior to the note acceleration due to the subordinate lockout being in effect (after June 2017), there will be limited cross-collateralization between classes A-1 and A-2 to the extent there are excess collections on either pool. The 2017-A transaction includes class B (unrated) and class C (unrated). The interest rates on class B and class C are subject to available funds caps. At closing, the issuer will use a portion of the notes' proceeds to make initial deposits to the class A-1 and A-2 reserve accounts in the amounts equal to 0.25% of the initial class A-1 and class A-2 note balances, respectively. Each reserve account has a target balance of 0.25% of the related outstanding note balance and is subject to a floor of 0.15% of the related initial note balance. If the collections on the related loan pool are not sufficient to pay monthly senior fees, monthly interest, or principal at the final maturity of the related note class, the related reserve account can be accessed for these payments. The funds in the reserve accounts are replenishable according to the payment priority if the funds are available after the payments of the first three items in the payment waterfall tables below. JANUARY 31,

4 At closing, the issuer will use a portion of the notes' proceeds to make initial deposits to the class B and class C liquidity accounts in the amounts equal to 0.25% of the class B and class C initial note balances, respectively. Each liquidity account has a target balance of 0.25% of the related outstanding note balance and is subject to a floor of 0.15% of the related initial note balance. Funds in the each liquidity account will be available only for the related note class. Payment Structure The issuer will make payments on the notes in the following priority (see tables 1 and 2) on the 25th day of each calendar month or the following business day, beginning in April Table 1 Variable-Rate Pool Payment Waterfall Priority Payment 1 Senior transaction fees allocable to the variable-rate pool. 2 Class A-1 interest payment. 3 Class A-1 principal on its maturity date; 4 Replenishment of the class A-1 reserve account to the required level, if necessary (i). 5 Class A-1 first priority principal distribution amount (ii). 6 Class B interest payment allocable to the variable-rate pool (iii). 7 Class C interest payment allocable to the variable-rate pool (iv). 8 Class A-1 regular principal distribution amount (v). 9 Transfer to the fixed-rate pool's available funds only if there are not enough funds there to pay the first eight items of the fixed-rate pool payment waterfall (vi). 10 Replenishment of the class B liquidity account to the required level, if necessary. 11 Class B principal distribution amount (v). 12 Class B interest carry-over amount (iii). 13 Replenishment of the class C liquidity account to the required level, if necessary. 14 Class C principal distribution amount (v). 15 Class C interest carry-over amount (iv). 16 Subordinate fees allocable to the variable rate pool. 17 Pay to the class R certificateholders a certain percentage of any remaining proceeds. (i)if the reserve account balance is below its target balance, it is required to be replenished after paying the first three items in the waterfall to the extent the funds are available. (ii)class A-1 first priority principal distribution amount is designed to restore, if necessary, the senior class A-1 parity to 100%. (iii)class B interest payable under item 6 is subject to an available funds cap. The class B carry-over interest amount is payable under item 11. (iv)class C interest payable under item 7 is subject to an available funds cap. The class C carry-over interest amount is payable under item 15. (v)the regular principal distribution amount payable on and after July. 25, 2017, and before the occurrence of the subordinate lockout, is designed to build up, maintain, and restore (if necessary) the total overcollateralization of 13.10% with a floor of $6,900,000. Before July 25, 2017, and after the occurrence of the subordinate lockout, all funds remaining after the payment of the preceding items of the payment waterfall will be used to repay principal (i.e., the turbo principal payment). (v)any funds remaining after the payment of the first eight items of variable-rate pool payment waterfall can be used to cover payment shortfalls on the first eight items of the fixed rate pool waterfall (to the extent there are insufficient funds in its related distribution account and reserve account). Table 2 Fixed-Rate Pool Payment Waterfall Priority Payment 1 Senior transaction fees allocable to the fixed-rate pool. 2 Class A-2 interest payment, pro rata. JANUARY 31,

5 Table 2 Fixed-Rate Pool Payment Waterfall (cont.) Priority Payment 3 Class A-2 principal on its maturity date; 4 Replenishment of the class A-2 reserve account to the required level, if necessary (i). 5 Class A-2 first priority principal distribution amount (ii) (vi). 6 Class B interest payment allocable to the fixed-rate pool (iii). 7 Class C interest payment allocable to the fixed-rate pool (iv). 8 Class A-2 regular principal distribution amount (v). 9 Transfer to the variable-rate pool's available funds only if there are not enough funds there to pay the first eight items of the variable-rate pool payment waterfall (vi). 10 Replenishment of the class B liquidity account to the required level, if necessary. 11 Class B principal distribution amount (v). 12 Class B interest carry-over amount (iii). 13 Replenishment of the class C liquidity account to the required level, if necessary. 14 Class C principal distribution amount (v). 15 Class C interest carry-over amount (iv). 16 Subordinate fees allocable to the fixed rate pool. 17 Pay to the class R certificateholders a certain percentage of any remaining proceeds. (i)if the reserve account balance is below its target balance, it is required to be replenished after paying the first three items in the waterfall to the extent the funds are available. (ii)class A-2 first priority principal distribution amount is designed to restore, if necessary, the senior class A-2 parity to 100%. (iii)class B interest payable under item 6 is subject to an available funds cap. The Class B carry-over interest amount is payable under item 11. (iv)class C interest payable under item 7 is subject to an available funds cap. The Class C carry-over interest amount is payable under item 15. (v)the regular principal distribution amount payable on and after July. 25, 2017, and before the occurrence of the subordinate lockout, is designed to build up, maintain, and restore (if necessary) the total overcollateralization of 13.10% with a floor of $6,900,000. Before July 25, 2017, and after the occurrence of the subordinate lockout, all funds remaining after the payment of the preceding items of the payment waterfall will be used to repay principal (i.e., the turbo principal payment). (v)any funds remaining after the payment of the first eight items of variable-rate pool payment waterfall can be used to cover payment shortfalls on the first eight items of the fixed rate pool waterfall (to the extent there are insufficient funds in its related distribution account and reserve account). (vi)principal allocation between class A-2A and A-2B is sequential but can switch to a pro rata allocation on or after July 25, 2017, only if the subordinate lockout goes into effect. The administrator may purchase all remaining trust student loans when the pool balance is less than 10% of the initial pool balance at a price sufficient to fully repay the notes' outstanding principal amount together with the accrued interest. Transaction Overview The sponsor originated the private student loans in the SoFi 2017-A portfolio under its SoFi loan program. The initial portfolio loans are currently owned by the sponsor, its financing subsidiaries, or by Goldman Sachs Bank USA (which has purchased the loans from the sponsor). On the closing date, the initial portfolio loans not currently owned by the sponsor will be re-acquired by the sponsor, and all initial portfolio loans will be purchased from the sponsor by the underlying trust pursuant to the loan sale agreement. Additional portfolio loans are expected to be purchased on the closing date from the sponsor by the underlying trust pursuant to the loan sale agreement from amounts deposited into the acquisition accounts, which will be equal to the principal payments received on the initial portfolio loans between Jan. 3, 2017, and the last business day before the closing date. On the closing date, the issuer will transfer a portion of the proceeds of the securities to the underlying trust in JANUARY 31,

6 exchange for the issuance of the underlying certificate, and the underlying trust will use a portion of that amount to acquire the portfolio loans. The underlying trust certificate will represent the entire ownership interest in the underlying trust. The assets of the underlying trust include: The SoFi series 2017-A loan pool (initial and additional portfolio loans); The funds and investment securities in the accounts established under the underlying trust agreement; and Rights under related contracts. Chart 1 shows an overview of the transaction. JANUARY 31,

7 Pool Analysis The class A-1 and A-2 noteholders will receive payments primarily from collections on the variable-rate loan pool and fixed-rate loan pool, respectively. Table 3 outlines the SoFi 2017-A initial pool's characteristics as of Jan. 3, Table 3 SoFi 2017-A Initial Pool Characteristics As Of Jan. 3, A total pool 2017-A fixed-rate loan sub-pool 2017-A variable -rate loan sub-pool Principal amount ($) 599,964, ,008, ,955,484 Accrued interest to be capitalized ($) 39,209 28,430 10,779 Total 600,003, ,037, ,966,263 % of the total Average loan amount per borrower ($) 75,287 72,898 84,471 Weighted average annual gross income at origination (excluding in-school loans) ($) Weighted average monthly free cash flow at origination (excluding in-school loans) ($) % of the aggregate loan amount using ACH (automatic account debit) (%) 170, , ,384 7,088 7,173 6, Weighted average obligor's age School ranking--% of the pool Top 20 schools (i) Top schools (i) Top schools (i) Top schools (i) Schools ranked 101 or higher or not ranked (i) Total Degree level--% of the pool Advanced degrees Bachelor's degrees Total Credit score--% of the pool(ii) 740 and above Total Weighted average credit score(ii) (%) Current weighted average interest rate reduced by the borrower benefits (%) (i)the higher of the two rankings: undergraduate school attended and graduate school attended. The rankings are based on the SoFi Select 100 ranking. (ii)credit scores are based on the statistical credit models developed by Fair Isaac Corp. or VantageScore Solutions LLC. (iii)free cash flow, as calculated by SoFi Lending Corp. at the time of loan origination, is defined as the obligor's monthly disposable income after taxes, all of the obligor's debt payments (including student loans), and the obligor's rent estimate based on zip code. SoFi--Social Finance. JANUARY 31,

8 Table 4 SoFi 2017-A Compared To SoFi 2015-B, SoFi 2015-A, SoFi 2014-B, And SoFi 2014-A Initial Pool Characteristics Transaction 2014-A 2014-B 2015-A 2015-B 2017-A Cut-off date May 31, 2014 Oct. 15, 2014 Dec 31, 2014 March 31, 2015 Jan. 3, 2017 Principal amount ($) 278,567, ,394, ,586, ,182, ,964,445 Accrued interest to be capitalized ($) 4,180 32,605 40,428 75,759 39,209 Total 278,571, ,427, ,626, ,258, ,003,654 Average loan amount per borrower ($) 78,714 73,018 77,534 74,891 75,287 Weighted average annual gross income at origination (excluding in-school loans) ($) 140, , , , ,260 % of gross income # $100,000 (%) Weighted average monthly free cash flow at origination (excluding in-school loans) ($) % of the aggregate loan amount using ACH (automatic account debit) (iii) (%) 5,770 5,916 5,867 5,966 7, Weighted average obligor's age School ranking--% of the pool(i) Top 20 schools Top schools Top schools Top schools Schools ranked 101 or higher or not ranked (%) Total Degree level--% of the pool Advanced degrees Bachelor's degrees Total Credit score--% of the pool(ii) 740 and above Total Weighted average credit score(ii) Current weighted average interest rate reduced by the borrower benefits (%) (i)the higher of the two rankings: undergraduate school attended and graduate school attended. The rankings are based on the SoFi Select 100 ranking. (ii)credit scores are based on the statistical credit models developed by Fair Isaac Corp. or VantageScore Solutions LLC. (iii)free cash flow, as calculated by SoFi Lending Corp. at the time of loan origination, is defined as the obligor's monthly disposable income after taxes, all of the obligor's debt payments (including student loans), and the obligor's rent estimate based on zip code. SoFi--Social Finance. JANUARY 31,

9 S&P Global Ratings' Expected Default Rate: 4.00% To arrive at our cumulative expected default rate for the SoFi 2017-A transaction, we considered the cumulative default rates of the four outstanding SoFi securitizations (2014-A, 2014-B, 2015-A, and 2015-B). We also analyzed credit characteristics of defaulted loans in SoFi's total portfolio as well as performance data for similar loan types of other issuers. We adjusted our analysis to reflect the series 2017-A pool composition. S&P Global Ratings recently completed its surveillance review of the four outstanding SoFi securitizations (see "Eight SoFi Professional Loan Program LLC Ratings Raised," published Jan. 30, 2017). Below is a summary of our revised lifetime cumulative default rate assumptions for these four deals: Table 5 S&P Global Ratings' Revised Default Assumptions For SoFi 2014-A, 2014-B, 2015-A, And 2015-B Transaction Reported cumulative default rate between the closing date and Sept. 30, 2016 (%) Revised lifetime cumulative base case default rate assumption as a percentage of the initial pool balance (as of January 2017) (%) Revised remaining cumulative base case default rate assumption as a percentage of the current pool balance (%) SoFi 2014-A SoFi 2014-B SoFi 2015-A SoFi 2015-B We also analyzed the credit characteristics of the defaulted refinance student loans in SoFi's total portfolio. Based on our analysis, we believe that loan obligors without advanced degrees or those with FICO scores below 700 have historically defaulted more frequently than SoFi obligors with advanced degrees or FICO scores above 700. We compared the 2017-A pool to the initial characteristics of the 2014-A through 2015-B pools in terms of concentrations of obligors without advanced degrees and obligors with FICO scores below 700. A comparison summary is below. Table 6 FICO Scores Distribution And Advanced Degree Percentage In SoFi 2017-A, SoFi 2015-B, SoFi 2015-A, SoFi 2014-B, And SoFi 2014-A Degree FICO 2014-A (% of 2014-B (% of 2015-A (% of 2015-B (% of 2017-A (% of Undergraduate below Undergraduate Undergraduate Undergraduate Undergraduate Undergraduate Total undergraduate Advanced below Advanced Advanced JANUARY 31,

10 Table 6 FICO Scores Distribution And Advanced Degree Percentage In SoFi 2017-A, SoFi 2015-B, SoFi 2015-A, SoFi 2014-B, And SoFi 2014-A (cont.) Degree FICO 2014-A (% of 2014-B (% of 2015-A (% of 2015-B (% of 2017-A (% of Advanced Advanced Advanced Total advanced As the comparison table above indicates, the 2017-A pool has a higher concentration of obligors without advanced degrees or FICO scores below 700 than those in the 2014-A through 2015-B pools. Based on our revised default rate assumptions for the 2014-A through 2015-B transactions and the 2017-A pool composition, our base-case default rate assumption for the 2017-A pool is 4.00%. Cash Flow Modeling Assumptions And Results We modeled the series 2017-A transaction to simulate stress scenarios that we believe are commensurate with the assigned ratings (see table 7). Table 7 Stressed Cash Flow Modeling Assumptions For 'A' Scenarios Rating Cumulative default rate (%) Cumulative default timing -fast scenario (approximate %) per year(ii) Cumulative default timing -slow scenario (approximate %) per year(ii) Cumulative recovery rate (%) 10 AAA(sf) 20.0 (i) 20/20/20/20/20 15/15/15/15/10/10/10/10; loans with five-year term: 20/20/20/20/20 Cumulative recovery rate timing (approximate %) per year 1.0/1.0/1.0/1.0/1.0/1.0/1.0/1.0/1.0/1.0 Voluntary prepayment rate--standard prepayment scenario (% CPR) per year(iii) Voluntary prepayment rate--high prepayment scenario (% CPR) per year(iii) Voluntary prepayment rate--zero prepayment scenario (% CPR) per year(iii) Deferment (% of borrowers without advanced degree) Forbearance % per year (for all loans in repayment and in school loans as they enter repayment) 5/6/7/8/9/10 for the transaction's remaining life 20% for the life of the deal 0% for the life of the deal 5% of loans go into deferment for a maximum period permitted by the policy 5% of loans go into forbearance for a maximum period permitted by the policy (i)the combination of the default timing curve assumption and loan remaining term only allowed for defaults of approximately 18.6%-19.9% in the 'AAA' credit runs depending on the default timing curve and interest rate scenario. The default rates achieved in the 'AAA' break-even scenarios were in the 26%-27% range (see below). (ii) We ran separate fast and slow default timing scenarios. (iii)we ran three different prepayment speeds in the 'AAA' credit scenarios. CPR--Constant prepayment rate. We modeled the stressed cash flow scenarios in three different interest rate environments, which we based on three one-month LIBOR interest rate paths (see chart 2). JANUARY 31,

11 Chart 2 'AAA' Stressed Cash Flow Results We stressed the cumulative default rates for the pool at 18.6%-19.9%% in the 'AAA' cash flow scenarios. We derived voluntary prepayment rate, forbearance rate, the recovery rate assumptions from our review of the sponsor's and of the industry's historical data, which we adjusted to reflect the 2017-A's pool composition and the assigned ratings. The principal repayment on the notes switched to the turbo mode in all of our 'AAA' credit scenarios due to the subordinate lockout trigger. In the 'AAA' cash flow scenarios, class A notes received interest payments due on every distribution date and principal payments by the notes' maturity dates. In addition, we ran several liquidity cash flow scenarios with zero voluntary prepayments and other stress assumptions specified above to test the assets' ability to repay the notes by their maturity dates. The first three liquidity scenarios assumed a zero default rate and one of the three interest rate vectors as described above. Six other liquidity scenarios assumed the base-case default rate (either a fast or a slow default curve) and one of the three interest rate vectors as described above. The principal repayment on the notes switched to the turbo mode in our liquidity scenarios with the JANUARY 31,

12 base-case default rate due to the subordinate lockout trigger. The zero default liquidity scenarios switched to the turbo mode when the pool factor was at 10%. Under these liquidity cash flow scenarios, the series 2017-A notes received interest payments due on every distribution date and principal payments by the notes' maturity dates. Break-Even Cash Flow Results In addition to 'AAA' stressed cash flow scenarios using the 'AAA' stress default rate assumption, we ran break-even cash flow scenarios that maximized the default rate while keeping all other assumptions at the 'AAA' level. In the 'AAA' break-even scenarios, the series 2017-A transaction was able to absorb cumulative defaults in the 26%-27% range and cumulative net losses in the 23%-24% range. These results support a coverage multiple of approximately 7.8x-8.0x our base-case net loss rate for the pool, depending on the interest rate and default curve scenario. The principal repayment on the notes switched to the turbo mode in all of our break-even credit scenarios due to the subordinate lockout trigger. In each of these break-even scenarios, the transaction paid timely interest and note principal by the legal final maturity date. Sensitivity Cash Flow Analysis In addition to the 'AAA' stressed and break-even cash flows, we ran cash flow scenarios to assess the rating stability of the SoFi series 2017-A transaction under moderate stress conditions ('BBB' stress scenarios)(see table 8). The principal repayment on the notes switched to the turbo mode in all of our sensitivity credit scenarios due to the subordinate lockout trigger. Table 8 Sensitivity Cash Flow Modeling Assumptions Cumulative default rate (%) 8.5%-9.0% Cumulative default timing -fast scenario (approximate %) per year(i) Cumulative default timing -slow scenario (approximate %) per year(i) Cumulative recovery rate (%) /20/20/20/20 15/15/15/15/10/10/10/10; loans with five-year term: 20/20/20/20/20 Cumulative recovery rate timing (approximate %) per year 1.75/1.75/1.75/1.75/1.75/1.75/1.75/1.75/1.75/1.75 Voluntary prepayment rate (% CPR) per year (other than Smart Option loans) Deferment (% of borrowers without advanced degree) Forbearance % per year (for all loans in repayment and in school loans as they enter repayment) (i)we ran separate fast and slow default scenarios. CPR--Constant prepayment rate. 3/4/5/6/7 for the transaction's remaining life 5% of loans go into deferment for a maximum period permitted by the policy 5% of loans go into forbearance for a maximum period permitted by the policy In moderate stress scenarios, the cumulative remaining credit enhancement coverage of the remaining net losses build over time (see chart 3). The lines on the charts below represent the class A cumulative remaining credit enhancement as a multiple of the remaining net losses in the six moderate stress scenarios. JANUARY 31,

13 Chart 3 At closing, under a moderate stress scenario, the class A notes would have an approximately 4.5x coverage multiple of remaining net losses. The class A coverage multiple rises throughout the transaction's life, reaching 5.0x-5.3x after one year. Based on the cash flow scenarios above, we would expect our ratings on the class A notes to remain within one rating category of our 'AAA (sf)' rating in the first year, which is consistent with our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). Social Finance Inc. (SoFi) SoFi was founded in 2011 by a group of Stanford Graduate School of Business alumni. Under its 2011 pilot program, SoFi raised capital from Stanford alumni and offered private student loans to Stanford business school students. Since its founding, SoFi has shifted its lending strategy to refinancing student loans of employed graduates (from various schools) with high income levels, free cash flow, and credit scores. This strategy is intended to mitigate two major risks for traditional student loan borrowers: non-graduation and unemployment upon graduation. SoFi can offer more competitive pricing to its borrowers than the pricing on their existing student loans they obtained when they were attending school. JANUARY 31,

14 In addition to traditional student loan underwriting metrics (such as credit score, income, and adverse credit history checks), SoFi's underwriting criteria include a monthly free cash flow calculation at the time of loan origination (monthly disposable income after taxes, all debt payments including student loans, and a rent estimate based on the obligor's zip code). MOHELA MOHELA was established in 1981 to assure that all eligible post-secondary education students have access to guaranteed student loans. The authorizing act has been amended over the years to provide MOHELA with generally expanded powers to finance, acquire, and service student loans including, but not limited to, those guaranteed or insured pursuant to the Higher Education Act. MOHELA licenses COMPASS, the servicing system used by PHEAA and Tru Student. MOHELA provides full-service private student loan servicing, defaulted student loan rehabilitation management, and FFELP loan servicing for its own student loans and those owned by third parties. MOHELA also services Direct Loans for the U.S. Department of Education, having been awarded a servicing contract as a not-for-profit servicer in September As of Dec. 31, 2016, MOHELA was servicing $1.8 billion in FFELP loans representing 126,677 accounts, $8.0 billion in third-party lender-owned private loans representing 110,921 accounts, $119.4 million in MOHELA-owned private loans representing 10,896 accounts, and $32.7 billion in Direct Loans representing 1,760,042 accounts. MOHELA began originating and servicing loans for its own private loan program in MOHELA originated and serviced over $370 million in private loans for over 30,000 borrowers before ending the program in Through an affiliate, MOHELA has also launched the Missouri Family Education Loan Program (MOFELP), an interest-free loan program for Missouri students meeting certain financial need and academic achievement standards. As of Dec. 31, 2016, MOFELP had approximately $6.3 million outstanding with 1,434 borrowers in repayment. The Back-Up Administrator ECMC Holdings Corp. is the back-up administrator. ECMC Holdings is a wholly owned subsidiary of ECMC Group Inc., a Delaware nonprofit corporation. The core of the ECMC Group companies' nonprofit activities is providing support for the administration of federal student loan programs and the activities of Educational Credit Management Corp. (ECMC). ECMC is a national guaranty agency under the FFELP and the designated guarantor in Virginia, Oregon, Connecticut, and California. As of Dec. 31, 2016, ECMC reported to the National Student Loan Data System weekly on a current outstanding student loan portfolio of $35.3 billion. ECMC Holdings is party to an intercompany service agreement with ECMC and ECMC Group, according to which it may receive services from other ECMC Group entities as necessary to perform any required functions as a back-up administrator or as successor administrator. JANUARY 31,

15 Related Criteria And Research Related Criteria General Criteria: Methodology And Assumptions For Stressed Reinvestment Rates For Fixed-Rate U.S. Debt Obligations, Dec. 22, 2016 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 0, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Global Framework For Cash Flow Analysis Of Structured Finance Securities, Oct. 9, 2014 Criteria - Structured Finance - ABS: Methodology And Assumptions For U.S. Private Student Loan ABS Credit Analysis, Feb. 13, 2013 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - RMBS: U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Criteria - Structured Finance - ABS: Student Loan Criteria: Evaluating Risk In Student Loan Transactions, Oct. 1, 2004 Criteria - Structured Finance - ABS: Student Loan Criteria: Rating Methodology For Student Loan Transactions, Oct. 1, 2004 Criteria - Structured Finance - ABS: Student Loan Criteria: Structural Elements In Student Loan Transactions, Oct. 1, 2004 Related Research Global Structured Finance Scenario And Sensitivity Analysis 2016: Understanding The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 Economic Research: Giving America A Raise (In The Minimum Wage) Would Foster Inclusive Growth, Sept. 14, 2016 Structured Finance Likely To Grow Moderately In 2016 While Leaving Significant Securitization Capacity On The Table, Jan. 7, 2016 Overview Of Legal Criteria For U.S. Structured Finance Transactions, Oct. 1, 2006 The Rating Process For Student Loan Transactions, Oct. 1, 2004 The Rating Process For Student Loan Transactions, Oct. 1, JANUARY 31,

16 Student Loan Programs, Oct. 1, 2004 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analyst: Lyuda Ryabkova, New York (1) ; lyuda.ryabkova@spglobal.com Secondary Contact: John Anglim, New York (1) ; john.anglim@spglobal.com Analytical Manager: Frank J Trick, New York (1) ; frank.trick@spglobal.com JANUARY 31,

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