Fitch Takes Various Actions on SLM 2006-5
OREANDA-NEWS. Fitch Ratings has taken the following rating actions on SLM Student Loan Trust 2006-5:
--Class A-5 affirmed at 'AAAsf'; Outlook Stable;
--Class A-6A at 'AAAsf'; Rating Watch Negative maintained;
--Class A-6B at 'AAAsf'; Rating Watch Negative maintained;
--Class A-6C at 'AAAsf'; Rating Watch Negative maintained;
--Class B affirmed at 'Asf'; Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral is comprised of 100% Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.
Sufficient Credit Enhancement: While both the senior and subordinate notes will benefit from future excess spread, the senior notes also benefit from subordination provided by the class B note. As of December 2015, total parity is 100.00% and senior parity is 104.91% (4.68% CE). Cash is being released from the trust given that the 100% total parity is maintained.
Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at its floor of $4,524,559.
Acceptable Servicing Capabilities: Navient Solutions, as servicer, is responsible for servicing the trust. Fitch believes Navient to be an acceptable servicer of FFELP student loans.
On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the "Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria", dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.
Since the FFELP student loan ABS relies on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.