SoFi Said to Be Selling Its First Rated Consumer Loan Bonds

Social Finance Inc., an online lender branching away from its original focus on student loans, is packaging consumer loans into about $500 million of bonds with credit ratings that it aims to sell this month, according to a person familiar with the matter.

The bonds will be the company’s first that are both backed by consumer loans and have a credit rating. Many fund managers can’t buy unrated bonds, so having a grade allows SoFi to sell to a broader array of investors. 

DBRS Ratings Ltd. may assign grades as high as A to the bonds, the person said. SoFi has previously sold notes that didn’t have credit ratings that were backed by personal loans, as well as rated bonds backed by student loans.

The deal may be one of the first of asset-backed securities backed by online loans sold by a finance company since LendingClub Corp. said in early May that its founder and chief executive officer was resigning and that the company had found problems with its controls. 

SoFi’s bond sale would help ensure reliable funding for its personal-lending business, which the company is trying to build. It is also making residential mortgages, and is planning to package them into bonds later this year, the person with knowledge of the sales said.

The personal loans that SoFi is packaging into bonds were mostly made to consumers with prime credit scores, and an average income of $140,000. The loan balances average around $36,000. As much as 80 percent of borrowers in the upcoming SoFi bond deal are homeowners, said the person, an unusually high percentage for consumer loans.

SoFi recently hired former Deutsche Bank structured-credit sales head Ashish Jain to help lead the company’s effort to issue more asset-backed securities and to help build relationships with investors, ratings firms, banks and other market participants.

Laurel Toney, a spokeswoman for SoFi, declined to comment.

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