GreenSky® Home Improvement loans recently announced a $739M securitization for 2024.
The famed POS home improvement lender that went public, then acquired by Goldman Sachs, and recently sold to Sixth Street.
Quick overview of GreenSky:
– Founded in 2006
– Facilitates point-of-sale financing for home improvement projects
– Has originated over $50 billion in loans since founding
– $4.5 billion originated in 2023
– Recently acquired by a consortium led by Sixth Street
Partner bank: Synovus Bank
Products:
GreenSky offers 3 types of unsecured loan products with fixed interest rates and long terms:
1. Reduced Rate Loans
– Interest Rates between 2.99% and 12.99%
– Repayment terms between 24 and 240 months
– May include an interest-only period for the first six months
2. Zero Interest Loans
– 0% annual interest rate for the life of the loan
– Repayment terms between 24 and 240 months
– Payments typically begin about one month after the borrower first uses the loan
3. Deferred Interest Loans
– Includes a deferred interest promotional period from 6 to 24 months
– Full principal balance can be paid off with no interest due during the promotional period
– If not paid in full during the promotional period, they become interest-paying amortizing loans
– Interest Rates between 17.99% and 24.99% for the life of the loan
Underwriting:
– Bureau: Experian
– FICO 620+ (for the selected securitization)
– Higher FICO and lower DTI borrowers are offered higher loan amounts
– Different FICO and DTI cut-offs based on the product
Credit Portfolio:
– The $850 million collateral pool consists of 61,871 consumer loans.
Key metrics:
– Wtd avg APR: 12.12%
– Wtd avg FICO: 781
– Wtd avg Annual Income: $147,000
– Wtd avg DTI (non-zero): 23.2%
– Avg loan balance: $13,738
– Wtd avg original term: 111 months
– Wtd avg seasoning: 6 months
– Top 3 states: TX (9.4%), FL (7.8%), CA (7.1%)
Loan type breakdown:
– Reduced Rate Loans: 61.8%
– Zero Interest Loans: 10.4%
– Deferred Interest Loans: 27.8%
GreenSky has seen a drop in reduced rate loans and zero interest loans, but a growth in deferred interest loans.
The loans are primarily to prime borrowers. FICO score distribution:
– <670: 1.1%
– 670-699: 4.4%
– 700-774: 36.2%
– 775+: 58.3%
Top merchant categories:
– Windows and Doors: 44.0%
– HVAC: 15.5%
– Kitchen and Bathrooms: 14.6%
Excess spread is high at 4.03%, providing ample cushion for a high quality portfolio.
Default Rates:
Reduced Rate Loans have the highest CNL of 7%+, Zero Interest Loans peak at 2.5%, and Deferred Interest Loans also at 2.5%.
Servicing:
GreenSky services the portfolio and charges a servicing fee of 1.10%.
Distribution of payment methods:
GreenSky Online Portal: 61.7%
Check: 25.2%
Phone: 7.5%
Others: 5.6%
Backup Servicer:
Systems & Services Technologies, Inc. (SST)
GreenSky’s credit performance has shown some post-pandemic normalization in 2022 and 2023 vintages. The company has shifted its origination mix to higher FICO borrowers in response.