At the upcoming SCI Marketplace Lending Securitisation Seminar in New York on 22 June, panellists will discuss the structuring and evolution of marketplace loan ABS. The fact that deals are increasingly incorporating features to reduce risk is one area that is expected to be covered.

Ram Ahluwalia, ceo of PeerIQ, notes that more standardisation is still needed for marketplace loan ABS, given transactions differ structurally. He says: "On recent deals, structurally we've seen increased credit enhancement on unsecured personal loan deals from some issuers. Each issuer has its own template and there is a lack of standardisation in documentation, structure and reps and warranties."

Platforms are also taking a larger role in the process. "In terms of trends though, we're seeing issuers taking control over the securitisation process. There's a growing need for greater verification and data; repeat issuance is a trend; and there is a rise in the number of new issuers; as well as the growth of multi-seller transactions," he adds.

This trend is supported by the recent US$495m Prosper Marketplace Issuance Trust Series 2017-1 - the first ABS launched by Prosper via its own branded shelf, when previous deals had been issued by Citi on the CHAI shelf. Rated by KBRA and Fitch, the deal comprises US$311m A/A- class A notes and US$70.67m BBB/BBB- class B notes. KBRA rated the US$113m class C notes single B-plus, but these are unrated by Fitch.

Lending Club too has tapped the ABS market and is currently looking to market a major multi-seller consumer loan ABS. Ahluwalia suggests that this is a "significant milestone" for the firm and means it is "now able to provide a repeat path to liquidity for whole loan buyers."

There is also some evidence that marketplace loan ABS performance has improved over time, with spreads tightening and increases in credit enhancement on certain transactions (SCI passim), which has helped facilitate better engagement across the industry. "New issue and secondary spreads have tightened considerably. This is more to do with investor confidence and the increasing role that bulge-bracket banks are playing in the asset class than the deals themselves improving or changing structurally. We are also seeing increased participation across the board, especially from rating agencies, with even Fitch now coming in to rate the recent Prosper deal," comments Ahluwalia.

Additionally, while the impact on marketplace lending is difficult to assess, risk retention rules have had some effect. Ahluwalia says that one possible downside is that the requirements have removed the ability of some issuers - that may have already been holding 5% risk or more - to differentiate themselves when every participant is held to the same standard.

He adds that regardless of risk retention, marketplace loan ABS has become a more established asset class, helped by the growth of new firms entering the market as well as repeat issuers. As a result, he forecasts 45% growth of new marketplace loan ABS issuance this year.

Ahluwalia concludes: "Investors are generally more confident with the asset class in general, not necessarily due to risk retention, and this has also been seen in rating agencies with S&P coming into the space. This is quite a change from when rating agencies said they'd never rate the stuff."

SCI's third annual Marketplace Lending Securitisation Seminar will be held at the offices of Arnold & Porter Kaye Scholer at 250 West 55th Street, New York, on 22 June. Further details and the link to register are available here.

RB