LendingPoint Pass-Through Trust Series 2022-ST4 is preparing its fourth round of asset-backed securities, seeking to raise $57.6 million, secured solely by debt consolidation or credit card refinancing loans to pay a home renovation or to make a major purchase.

The deal’s sponsor, LendingPoint, refers to consumer installment loans in the collateral pool as DTC loans, and are classified as newly originated or renewed loans, according to ratings agency Kroll Bond. Renewal loans are given to existing customers in good standing, allowing the company to offer a more competitive interest rate or term to existing customers who have already paid off part of the existing loan.

Compared to the LPPT-ST3 transaction, the current supply guarantee has a higher concentration of loans in categories A2 and B1, which have the lowest probability of default, as well as B2, according to the KBRA.

Series LPPT 2022-ST4 will issue only one class of notes, rated “BBB-”, with overcollateralization and excess spread providing credit enhancement. For the latter, the transaction has an initial credit enhancement of 31.5% on the Class A notes.

KBRA noted that LPPT-ST4 uses a sequential payment structure, where Class A notes receive principal payments before certificates, so the structure can maintain the required overcollateralization amount. Gross losses on excess spreads are approximately 12.9%, based on a weighted average contract rate of 19.4%, less a management fee of 1.0% and an adjusted note coupon on the assumed weighted average life of 5.5%.

KRBA expresses its confidence in LendingPoint’s in-house service and collections department, which is made up of 199 people. The service department starts collecting a loan one day late. The company increases the collection intensity as it becomes more and more delinquent.

In what is seen as a mixed blessing, from a credit perspective, LendingPoint has a long delay, 181 days, before charging overdue loans. This is much longer than the 121 days, which are considered more conservative, but the lender estimates the window allows them to recoup around 10% more on the loans.