Consumer solar loans and home efficiency loans made to mostly prime credit quality homeowners is securing a $361 million transaction called GoodLeap Sustainable Home Solutions Trust 2021-3, or GOOD 2021-3.
GoodLeap, a company launched in 2017 to finance a solar loan origination platform, and in 2021 GoodLeap expanded its product offering to include home efficiency loans, including batteries, LED lighting, air conditioning and smart home technology. The company finances originations through warehouse lines of credit and forward flow arrangements from stable sources of liquidity.
The solar loans in the pool have balances between $5,000 and $100,000, with original terms of seven to 25 years, and interest rates between 1.48 percent and 7.99 percent. On average, GoodLeap borrowers had a weighted average FICO score of 741 when their loans were originated, according to an assessment from Kroll Bond Rating Agency.
The collateral pool consists of about $417.3 million in sustainable home improvement loans. As of the cutoff date, May 6, 2021, solar loans and home efficiency loans comprise 99.7 percent of the collateral pool, says KBRA.
Liquidity and the transaction structure are two of the deal’s clear positive aspects. Credit enhancement consisting of overcollateralization, subordination in the case of class A and class B notes, a cash reserve account and excess spread, yield supplement overcollateralization (YSOC), a cash reserve account and excess spread, KBRA says.
To get to a YSOC, the parties putting together the deal identify the present value of all scheduled payments on the sustainable home improvement loans discounted at their stated interest rate and the present value of all future payments on the loans discounted at a specified discount rate. In this case the latter is 3.5 percent. Finally, the YSOC amount is subtracted from the pool balance each month to determine an adjusted pool balance, KBRA says.
In another plus, GoodLeap is a profitable company, has no outstanding corporate debt, and generates excess cash. The management team is also highly experienced, KBRA says, bringing together expertise in clean energy, consumer lending, financial regulation and financial technology, among others.
KBRA expects to assign an ‘A’ on the $304.6 million class A notes; a ‘BBB’ on the $29.2 million class B notes; and ‘BB’ on the $27.1 million class C notes.