AverageDipBuyer@AverageDipBuyer
I tried writing a deep dive on the $SoFi ABS situation but I have decided not to publish it.
It became far too technical and would likely only spread confusion.
I'm pretty sure this correlated to SoFi heavily underperforming every other financial in the past few weeks.
Institutional investors got access to this information way before we did. I bet 99% of you didn't even know what I'm about to share.
The short version is that SoFi Consumer Loan Program 2025-1 has breached its cumulative net loss trigger of 2.60 percent. I'm pretty sure that this is the first time this has ever happened to SoFi.
The December 2025 distribution report already showed cumulative net charge offs at 2.15 percent on a pool amortized down to 60.11 percent of original balance. Subsequent performance has now crossed the line.
No matter your perspective, this is not a good sign.
However, it does not mean this is devastating for $SoFi's Loan Platform Business or even the personal loans they keep on their own balance sheet.
SoFi’s corporate level personal loan net charge off ratio actually improved to 2.86 percent in 2025 from 3.54 percent the prior year.
The 2025 1 trust is one specific vintage under pressure, not a proxy for the entire book. What this means is more technical but still important.
When a trigger like this is breached, the securitization structure shifts into a more defensive mode. Excess spread is diverted away from subordinate tranches and residual holders. Senior note amortization accelerates through turbo principal paydown. Overcollateralization steps up further and cash is trapped to protect the bond stack.
Current senior credit enhancement stands at approximately 14.04 percent, meaning the senior AAA notes now have significantly more protection than they did at issuance.
Importantly, rating agencies have not changed their ratings. Morningstar DBRS continues to rate the senior Class A notes AAA(sf), confirming that the structure still provides strong protection to bondholders even after the trigger breach.
In other words, the structure is doing exactly what it was designed to do when credit performance weakens.
Economically, the impact for SoFi would likely be real but indirect. It touching servicing valuations, future gain-on-sale economics, repurchase liabilities, and new LPB pricing.
In a market this fragile, I do not want to throw highly technical credit analysis into the timeline and watch it get turned into panic and FUD.
Once people see phrases like trigger breach, deteriorating credit, nuance dies immediately.
My draft was not a bearish article. It was about the technical explanation and the broader warning on capital markets dependence, while highlighting that SoFi’s on-balance-sheet personal loans continue to perform well and distribution to private credit buyers remains robust.
But I know how this platform works. So rather than contribute to confusion, panic, or oversimplification, I would rather hold it back.
Sometimes the responsible move is not posting.
And btw, that short report was ridiculous. Always funny when people discover fair value accounting. Must've been an intern writing that short thesis. But yeah, I'm just buying the dip and not selling a single share.
I'm still spending time on the Private Credit article I promised you guys, it's way more work than I expected, but a deal is a deal! It actually reminds me of my Master's thesis lol. Anyway, have a great day everyone.
