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Change Lending Issues Its 1st AAA-Rated Securitization 

David Krechevsky
Jun 20, 2023

The $307M Non-QM offering is backed solely by its proprietary Community Mortgages.

The Change Co. CDFI LLC and its subsidiary, Change Lending LLC, recently announced it has closed its seventh securitization of its proprietary Community Mortgages, and that it is the first such securitization to earn an AAA rating for the senior A1 class. 

The securitization is part of Change’s mission to provide lending options to underserved borrowers. As a community development financial institution (CDFI), at least 60% of its financing activities must target low- and moderate-income borrowers, or borrowers in underserved communities.

The recent $307 million offering included 16 unique investors, demonstrating the growing interest and strengthening demand from well-established residential mortgage-backed securities (RMBS) investors, Change said. The 16 investors included socially responsible money managers, banks, insurance companies, and private funds.

DBRS Morningstar rated the senior A1 class as AAA and the A2 class as AA, while Fitch Ratings rated the A3 through B2 along with DBRS. Both rating agencies cited the demonstrated performance history on prior Change Company CDFI issuances being in line with the broader non-qualified mortgage (Non-QM) market as rational for their assigned rating.

“Receiving our first AAA rating on a securitization comprised solely of our proprietary Community Mortgage is an important milestone for Change,” said Jesse Elhai, managing director of Capital Markets for Change. “We appreciate DBRS Morningstar and our investors for recognizing and rewarding the strong credit underwriting and performance of our Community Mortgage securitizations.”

The securitization was issued from Change’s shelf registration (CHNGE) and closed on May 25, the company said. It was comprised of loans with a weighted average FICO score of 740; a loan-to-value (LTV) of 71.1%; 43 months of reserves; and an 8.72% note rate, Change said.

“We are excited to close this groundbreaking RMBS securitization that recognizes the prime credit profile of the borrowers accessing our Community Mortgage program,” said Change Lending President Jason Biegel. “The AAA rating enables us to better serve our borrowers fairly and responsibly. Change Lending thanks its investors and looks forward to continuing to deliver quality investments to the mortgage investment marketplace.”

Change Founder Steven Sugarman told Inside Nonconforming Markets that his company worked closely with the rating services to help them understand the lender’s standards and its program’s unique role in the Non-QM market.  

“We’ve kind of had to get them comfortable with our program and underwriting,” he said.
The transaction follows the completion of a comprehensive assessment by Institutional Shareholder Services (ISS) that validated Change’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 becoming a CDFI in 2018, Change has funded over $25 billion in loans to more than 75,000 families. Change said it will continue to finance underbanked, prime borrowers — with a primary focus on Black, Latino, and low-income borrowers, and borrowers who live in low-income communities — to help eliminate the wealth gap in America.

Based in Anaheim, Calif., The Change Co. seeks to serve homeowners, small businesses, and consumers by bringing social and racial equity to banking and lending. Change Lending seeks to expand homeownership by providing credit-worthy loans to prime, underbanked borrowers. Since becoming a CDFI, over 70% of Change Lending’s loans have been to Black, Latino, and low- and moderate-income borrowers and communities, the company said.

Jun 20, 2023
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