DBRS Assigns Provisional Ratings to SoFi Mortgage Trust Series 2016-1

DBRS, Inc. (DBRS) has today assigned provisional ratings to the Mortgage Pass-Through Certificates, Series 2016-1 (the Certificates) issued by SoFi Mortgage Trust Series 2016-1 (the Trust) as follows:

-- $124.0 million Class 1A-1 at AAA (sf)
-- $124.0 million Class 1A-2 at AAA (sf)
-- $124.0 million Class 1A-2X at AAA (sf)
-- $112.1 million Class 1A-3 at AAA (sf)
-- $112.1 million Class 1A-4 at AAA (sf)
-- $112.1 million Class 1A-4X at AAA (sf)
-- $84.1 million Class 1A-5 at AAA (sf)
-- $84.1 million Class 1A-6 at AAA (sf)
-- $84.1 million Class 1A-6X at AAA (sf)
-- $28.0 million Class 1A-7 at AAA (sf)
-- $28.0 million Class 1A-8 at AAA (sf)
-- $28.0 million Class 1A-8X at AAA (sf)
-- $11.8 million Class 1A-M at AAA (sf)
-- $11.8 million Class 1A-MF at AAA (sf)
-- $11.8 million Class 1A-MI at AAA (sf)
-- $34.6 million Class 2A-1 at AAA (sf)
-- $34.6 million Class 2A-2 at AAA (sf)
-- $34.6 million Class 2A-2X at AAA (sf)
-- $31.3 million Class 2A-3 at AAA (sf)
-- $31.3 million Class 2A-4 at AAA (sf)
-- $31.3 million Class 2A-4X at AAA (sf)
-- $23.5 million Class 2A-5 at AAA (sf)
-- $23.5 million Class 2A-6 at AAA (sf)
-- $23.5 million Class 2A-6X at AAA (sf)
-- $7.8 million Class 2A-7 at AAA (sf)
-- $7.8 million Class 2A-8 at AAA (sf)
-- $7.8 million Class 2A-8X at AAA (sf)
-- $3.3 million Class 2A-M at AAA (sf)
-- $3.3 million Class 2A-MF at AAA (sf)
-- $3.3 million Class 2A-MI at AAA (sf)
-- $15.1 million Class A-M at AAA (sf)
-- $4.0 million Class B1 at AA (sf)
-- $2.4 million Class B2 at A (sf)
-- $1.2 million Class B3 at BBB (sf)
-- $928.0 thousand Class B4 at BB (sf)
-- $760.0 thousand Class B5 at B (sf)

Classes 1A-2X, 1A-4X, 1A-6X, 1A-8X, 1A-MI, 2A-2X, 2A-4X, 2A-6X, 2A-8X and 2A-MI are interest-only certificates. The class balances represent notional amounts.

Classes 1A-1, 1A-2, 1A-2X, 1A-3, 1A-4, 1A-4X, 1A-5, 1A-7, 1A-M, 2A-1, 2A-2, 2A-2X, 2A-3, 2A-4, 2A-4X, 2A-5, 2A-7, 2A-M and A-M are exchangeable certificates. These classes can be exchanged for a combination of depositable certificates as specified in the offering documents.

Classes 1A-3, 1A-4, 1A-4X, 1A-5, 1A-6, 1A-6X, 1A-7, 1A-8, 1A-8X, 2A-3, 2A-4, 2A-4X, 2A-5, 2A-6, 2A-6X, 2A-7, 2A-8 and 2A-8X are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes 1A-M, 1A-MF, 2A-M, 2A-MF and A-M) with respect to loss allocation.

The AAA (sf) ratings on the certificates reflect 6.05% of credit enhancement provided by subordinated certificates in the transaction. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 3.70%, 2.30%, 1.60%, 1.05% and 0.60% of credit enhancement, respectively.

Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The transaction is a securitization of a portfolio of first-lien, fixed-rate, prime residential mortgages. The Certificates are backed by 270 loans with a total principal balance of $168,790,946 as of the Cut-off Date (December 1, 2016).

The loans are divided into two pools. Pool 1 consists of fully amortizing fixed-rate mortgages (FRMs) with original terms to maturity of 30 years, while Pool 2 consists of fully amortizing FRMs with original terms to maturity of 15 years.

The loans were originated by SoFi Lending Corp. (SoFi) and are serviced by Cenlar FSB (Cenlar). CitiMortgage, Inc. (CitiMortgage) will act as the Master Servicer, and Citibank, N.A. (Citibank) will act as the Securities Administrator. Wilmington Trust, National Association will serve as Trustee, and Deutsche Bank National Trust Company will act as the custodian.

SoFi is a wholly owned subsidiary of Social Finance, Inc. (SFI) that is headquartered in San Francisco. Founded in 2011, SoFi is a premium financial services platform with a unique branding and marketing strategy that targets creditworthy early career professionals, principally from graduate schools and top tier undergraduate schools. SoFi began making refinanced student loans in 2012, and as of the date of this report, SoFi has issued 12 rated term student loan ABS transactions, all of which have been rated by DBRS. Performance of these securitizations has been satisfactory to date.

SoFi’s focused consumer base along with the company’s geographic location contributes to a heavy concentration of borrowers within California (77.5% of the SOFI 2016-1 pool) and particularly the San Francisco Bay Area (57.3%).

SoFi underwrites loans using traditional guidelines, while also considering alternative data such as a borrower’s Free Cash Flow. SoFi began originating mortgage loans in March 2014 and has experienced one 60+ day delinquency to date.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. Pool 1 and Pool 2 senior certificates will be backed by collateral from each pool, respectively. The subordinate certificates will be cross-collateralized between the two pools. This is generally known as Y-Structure.

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers and a satisfactory third-party due diligence review.

The Originator has made certain representations and warranties concerning the mortgage loans. The enforcement mechanism for breaches of representations includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans, and resolution of disputes may ultimately be subject to determination in an arbitration proceeding.

DBRS views the representations and warranties features for this transaction to be consistent with previous DBRS-rated prime jumbo transactions; however, the Originator, an unrated entity, may potentially experience financial stress that could result in its inability to fulfill repurchase obligations. To capture the above perceived weakness, DBRS adjusted the originator score downward. Such an adjustment (and consequent increases in default and loss rates) is to account for the Originator’s potential inability to fulfill repurchase obligations. The full description of the representations and warranties standard, the mitigating factors and the DBRS analysis are detailed in the related report.

Please see the related appendix for additional information regarding sensitivity of assumptions used in the rating process.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, Unified Interest Rate Model for Rating U.S. Structured Finance Transactions, Third-Party Due Diligence Criteria for U.S. RMBS Transactions, Representations and Warranties Criteria for U.S. RMBS Transactions, Legal Criteria for U.S. Structured Finance, Operational Risk Assessment for U.S. RMBS Originators and Operational Risk Assessment for U.S. RMBS Servicers, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.