Change Successfully Closes First AAA-Rated Securitization of CDFI Originated Home Loans
- First ever AAA-rated RMBS securitization comprised entirely of mortgage loans originated and sold by a Community Development Financial Institution (CDFI). The credit rating was issued by both S&P and DBRS Morningstar.
- $283 million of residential mortgage loans backed the significantly oversubscribed ESG offering was designated as a social bond by Institutional Shareholder Services (ISS).
- Financing enables Change to make homeownership more affordable for loans to Black, Latino, and other underbanked prime borrowers.
The Change Company CDFI LLC and its subsidiary Change Lending LLC (“Change”) – America’s CDFI – are pleased to announce that Change has closed the first ever AAA-rated securitization of residential home loans originated entirely by a CDFI. Investors in the $283 million Standard & Poor’s and DBRS Morningstar AAA-rated offering included socially responsible asset managers and banks seeking to finance home loans to credit-worthy Black, Latino, and low- and moderate-income borrowers and communities.
“We are proud to have been the first CDFI to securitize its own residential loans earlier this year. Today, we took another step towards bringing racial and social equity to homeownership by closing the first AAA-rated RMBS securitization by a CDFI.”
Jesse Elhai, Managing Director of Capital Markets
Jesse Elhai, Managing Director of Capital Markets for Change, said: “We are proud to have been the first CDFI to securitize its own residential loans earlier this year. Today, we took another step towards bringing racial and social equity to homeownership by closing the first AAA-rated RMBS securitization by a CDFI. This transaction validates the importance of the exemptions provided to CDFIs by the CFPB to fairly and responsibly meet the needs of minority and low-income borrowers. It also demonstrates the creditworthiness of prime borrowers left behind by traditional banks and lenders. We thank our financial partners for helping us further our mission of ending structural economic inequalities in homeownership. Change will continue to expand its partnerships with financial institutions seeking socially responsibly investments that level the financial playing field for Black, Latino and low-income Americans across the United States.”
The securitization, issued from Change’s shelf registration, named CHNGE 2022-NQM1 closed on August 24, 2022. The securitization was comprised of 375 loans with a weighted average FICO of 741, LTV of 77%, and note rate of 6.33%. Change has now completed four (4) securitizations in 2022 which have attracted 39 institutional investors.
Steven Sugarman, Founder of The Change Company, said: “The success of this transaction was the culmination of over 5 years of work. The securitization of loans originated by our CDFI have now earned the highest credit rating of AAA by the most respected rating agencies – Standard & Poor’s and Morningstar DBRS. There is a robust market for prime borrowers who have been left out of the financial system for noneconomic reasons. Homeownership is the key to closing the racial wealth gap and achieving generational wealth. We thank our financial partners who, through their investment in this AAA securitization, are enabling us to make fair and equitable homeownership in America more affordable.”
This transaction follows the completion of a comprehensive assessment by Institutional Shareholder Services (ISS), which validated The Change Company’s Social Bond and Loan Framework. The analysis by ISS determined that Change’s mission-driven mortgage products, social lending, and inclusive business model, align with the Social Bond Principles established by the International Capital Markets Association and positively contributed to the Sustainable Development Goals defined by the United Nations.
Since 2018, Change has funded over $20 billion in loans to more than 50,000 families. Change will continue to finance underbanked, prime homeowners to eliminate the wealth gap in America.
Barclays Capital, Cantor Fitzgerald, and Performance Trust served as the initial purchasers and joint bookrunners on the transaction. Dentons US LLP served as issuer counsel to Change and Hunton Andrews Kurth LLP served as underwriter counsel in the transaction.