PeerIQ's MPL Securitization Tracker for Q4 2016

We encourage readers to take a look at our Outlook section highlighting challenges and opportunities for investors in the year ahead.

Here are some highlights:

Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.4 Bn this quarter with cumulative issuance now totaling $15.1 Bn. Total issuance for 2016 came in at $7.8 Bn, as compared to $4.9 Bn in 2015, a 59% increase.

Although MPL origination volumes have declined at some platforms, the percentage of loans funded through ABS is at a record high of 70%.

The movement towards rated securitizations at larger transaction sizes continues. Further, the growth in average deal size continued, growing to $252 Mn in 2016 as compared to $35 Mn in 2013.

New issuance spreads continued to tighten in — a credit friendly environment for securitization. In 2016 we saw moderate spread compression across senior classes, indicating stable investor appetite for MPL ABS paper in the market.

We estimate $6.3 Bn to $11.2 Bn MPL ABS issuance for 2017. Goldman Sachs, Morgan Stanley, and Citi take top positions on the league tables.

Ratings Agencies grow increasingly comfortable with assessing MPL risk. Kroll provided the first rating for a securitization of Madden-Midland loans. DBRS tops the league tables in ratings activity.

We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that have sustained low-cost capital access, can build investor confidence via 3rd party tools, and have strong risk management frameworks will grow and take share.

Conferences:

Hiring Update: We are pleased to introduce two outstanding technology hires at PeerIQ:

Arjun Sharma is a Software Engineer at PeerIQ, where he works across both our quant and data teams on large data processing and distributed computation. An astrophysicist by training, Arjun formerly developed algorithms to detect patterns in particle accelerator runs and enjoys working through PeerIQ’s trickier math problems. Arjun earned a B.A. in both Physics and Computer Science from Williams College and his M.A. in Physics from University of Chicago.

Bryan Bonnet is a full-stack Software Engineer at PeerIQ where he focuses on the PeerIQ analytics platform. Prior to joining PeerIQ, Bryan was a technical co-founder of a digital health startup and previously focused on developing optimization and data visualization techniques as a research assistant. Bryan earned his B.E. in Computer Engineering and M.Eng. in Systems Engineering from Stevens Institute of Technology.

PeerIQ in the News:

Industry Update:

UK Government to Lend Further £40m Through Funding Circle (p2pFinanceNews, 1/5/17) Government backed British Business Bank has pledged an additional £40m through Funding Circle, totaling £100m to date.

Esoteric ABS Set to Clear Political and Policy Hurdles in 2017 (GlobalCapital, 1/1/17) Esoteric ABS is an increasingly attractive alternative to traditional assets in the post-crisis era.

Online Lending Enters Annual SEC Report on Rating Organizations for First Time (CrowdFundInsider, 1/2/17) The SEC’s acknowledgement of online lending in its “Annual Report on Nationally Recognized Statistical Rating Organizations” (NSROs) signifies the importance of securitization for online lenders and the greater role online lending plays in providing credit.

Donald Trump Nominates Wall Street Lawyer to Head S.E.C. (NYT, 1/4/17) The Trump Administration hires a deal-maker, Wall Street lawyer, Walter J. Clayton from Sullivan & Cromwell to head the S.E.C.

Global Regulators Postpone Pivotal Banking Reform Meeting (TheGuardian, 1/4/17) Global regulators postponed a meeting to agree on major reforms to the banking sector prompted by the 2008 crisis.

Prosper President Ron Suber: “Change is the Only Constant. Victory Goes to the Ones Who Change” (CrowdFundInsider, 1/4/17) Prosper CEO, Ron Suber provides his insights on online lending in 2016 and his expectations for the year ahead.

Lighter Fare:

Odd Lots: What Sneakers Can Tell You About How Financial Markets Work (Bloomberg, 12/19/16) CEO of StockX, Josh Luber explains how his startup hopes to unify the sneaker market.