Fitch Ratings has taken rating actions on Education Lending Group, Inc. – CIT Education Loan Trust 2005-1 (CIT 2005-1) as follows:
— Class A-3 notes affirmed at ‘AAAsf’; Outlook Stable;
— Class A-4 notes affirmed at ‘AAAsf’; removed from Rating Watch Negative and assigned a Stable Outlook;
–Class B notes upgraded to ‘AAsf’ from ‘A+sf’; removed from Rating Watch Negative and assigned a Stable Outlook.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral consists of Federal Family Education Loan Program (FFELP) loans, with guarantees provided by the transaction’s eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch’s U.S. sovereign rating is currently ‘AAA’, Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of 13.75% and a 41.50% default rate under the ‘AAAsf’ credit stress scenario. The base case default assumption of 13.75% implies a constant default rate of 1.97% (assuming a weighted average life of 13.5 years). Fitch applies the standard default timing curve in its credit stress cash flow analysis. The claim reject rate is assumed to be 0.25%.
The TTM average levels of deferment, forbearance, income-based repayment (before adjustment) and constant prepayment rate (voluntary and involuntary) are 4.12%, 9.33%, 8.99% and 10.00%, respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be approximately 0.37%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this trust as per the agency’s criteria.
Payment Structure: Credit Enhancement (CE) is provided by excess spread and overcollateralization. As of the September 2016 distribution date, total parity is 101.2% (1.20% CE) and senior parity is at 106.2% (5.8% CE). Liquidity support is provided by a reserve account sized at $2,000,000.
Maturity Risk: Fitch’s student loan ABS cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under the commensurate rating scenario.
Operational Capabilities: Day-to-day servicing for the trust’s entire portfolio is performed by ELSC and Great Lakes. Fitch believes both are acceptable servicers of FFELP student loans.
‘AAAsf’ rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating, given the strong linkage to the U.S. sovereign by nature of the reinsurance and SAP provided by ED. Sovereign risks are not addressed in Fitch’s sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the related lifetime default rate and basis spread assumptions. In addition, Fitch conducted a maturity sensitivity analysis by running different assumptions for the IBR usage and prepayment rate. The results below should only be considered as one potential model implied outcome as the transaction is exposed to multiple risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
–Default increase 25%: class A ‘AAAsf’; class B ‘AAsf’
–Default increase 50%: class A ‘AAsf’; class B ‘Asf’
–Basis Spread increase 0.25%: class A ‘AAAsf’; class B ‘AAsf’
–Basis Spread increase 0.50%: class A ‘AAAsf’; class B ‘AAsf’
Maturity Stress Rating Sensitivity
–CPR decrease 50%: class A ‘AAAsf’; class B ‘AAAsf’
–CPR increase 100%: class A ‘AAAsf’; class B ‘AAAsf’
–IBR Usage increase 100%: class A ‘AAAsf’; class B ‘AAAsf’
–IBR Usage decrease 50%: class A ‘AAAsf’; class B ‘AAAsf’
Stresses are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration in trust performance. Rating sensitivity should not be used as an indicator of future rating performance.
DUE DILIGENCE USAGE
ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.