GoodLeap prepares to issue $305.9 million in solar-related home improvement loans

GoodLeap Sustainable Home Solutions is readying a $305.9 million asset-backed securities (ABS) deal, expanding financing for home loans meant to finance alternative energy home improvements.

Loans for solar panel systems and batteries, like previous GoodLeap Sustainable deals, will support the bonds issued from the trust, according to Kroll Bond Rating Agency, and it’s the second deal to come to market from the platform this year.

Goldman Sachs & Co., ATLAS SP Securities, BofA Securities and Citigroup Global Markets are initial note purchasers on the deal, according to KBRA.  

The trust appears to have made a number of key changes in its collateral composition since the 2023-1 deal, which KBRA expects to have a positive credit impact on the outstanding notes. For one, the penetration of 25-year loans was 10.3% less than that of the 2023-1 deal, as of the cutoff date, says KBRA. Aside from the noticeable shift away from 25-year loans, GOOD 2023-2 has a higher concentration of loans extended to borrowers with FICO scores between 700 and 749, the rating agency said. It’s not the FICO band with the highest increase, however. The next bucket lower, 650-699, saw an increase of 3.96%, KBRA said.

These changes could bolster the credit on the outstanding notes, KBRA said, because loans with shorter terms and higher FICO scores generally have lower expected loss rates than those with longer terms and lower FICO scores, said KBRA.

Fitch Ratings also expects to assign ratings to the notes and points out that solar loans have strong recovery incentives. Photovoltaic, or PV, equipment is likely to save homeowners’ on their energy bills, and the lender has the right to disconnect the system—even remotely—on accounts in charge-off status. Adding to borrower incentive to stay current, the lien on the solar equipment dampens prospects for the borrower to resell the property, because mortgage lenders would most likely not fund a home loan until the title is cleared.

KBRA expects to assign ratings of ‘A’ to the $273 million, class A notes, which represent the bulk of the deal; ‘BB+’ to the class B notes; and ‘BB+’ to the class C notes. For its part, Fitch expects to assign ratings of ‘A-‘ to the class As; ‘BBB’ to the class B notes; and ‘BB’ to the class C notes.

The notes, all of which are fixed-rate, have an expected legal final maturity of May 2055, Fitch said.