The US economy added 200k jobs in January. Wage inflation accelerated to 2.9% YOY increasing the prospects of higher rates.

Janet Yellen chaired her last Fed meeting as the committee kept interest rates on hold in January. Futures are pricing in a 93% probability of a rate hike in March and 3 rate hikes for 2018. The recent sell off on the long end of the curve has seen 10-year treasury yields edge past 2.85%, providing respite to banks who were seeing their loan margins compress as the curve flattened.

In industry news, GS Marcus hired the credit card team from startup Final to bolster its efforts to launch a credit card. Given the secular slump in trading revenues at major banks, GS is focused on building high-ROE consumer banking businesses. GS expects its consumer business to generate more revenue than its trading business by 2020. In a similar development, SoFi has acquired the engineering and product teams of mortgage startup Clara Lending.

In securitization news, Marlette completed its largest securitization to date, with MFT 2018-1 coming in at $464 Mn. The deal was significantly over subscribed and eventually upsized continuing the trend of larger deal size that we pointed out in ourQ4 securitization trackerThe senior tranches were rated AA by Kroll. The collateral pool has 40,303 loans with an average loan balance of $12k, weighted average coupon of 14.3% and a FICO score of 703. All the loans were originated by Cross River Bank.

In regulatory news, a federal appeals court upheld the constitutionality of the CFPB. The court opined that the CFPB did not interfere with constitutional procedures despite its funding from the Federal Reserve. The ruling comes a week after CFPB director Mulvaney sought to lay out his vision for the bureau, which we analyzed last week. MLA’s Nat Hoopes testified before the House Financial Services Committee on behalf of the Marketplace Lending Association. We highlight some of the key points in his testimony below.

  • Marketplace Lending platforms are reaching the underserved sections of the economy, and providing them access to credit, with 70% of borrowers saying that they have expanded access to credit and a path out of high-interest credit card debt.
  • Online lenders use multiple factor besides credit score, enabling lenders to extend credit to credit worthy borrowers that otherwise would be rejected.
  • Reinforced the need for bills such as Protecting Consumers’ Access to Credit Act of 2017, the IRS Data Verification Modernization Act of 2017, and the OCC’s efforts to create a Special Purpose National Bank Charter for qualified fintech firms, among others.
  • The “valid when made” doctrine is critical to secondary trading of loans. However, the decision in the Madden case has created uncertainty that negatively impairs the availability and the price of credit to consumers and small businesses.
  • MLA strongly encouraged the Committee to support FinTech firms seeking the SPNB charter that will allow them to offer credit products nationally on par with banking institutions.


PeerIQ in the News:

Industry Update:

  • Podcast 136: Don Davis of Prime Meridian (Lend Academy, 2/2/18) Peter Renton interviews Don Davis, CEO of Prime Meridian Capital Managements, and gets his thoughts on marketplace lending today and what the future holds for Prime Meridian. Transcript here.

Lighter Fare: