NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions on Nelnet Student Loan Trust 2014-3:
--Class A 'AAAsf'; Rating Watch Negative maintained;
--Class B affirmed at 'A+sf'; Rating Outlook Positive.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral is comprised of 100% of Federal Family Education Loan Program (FFELP) loans including 20.7% of rehabilitated 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 (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, and for the senior notes, subordination of the class B note. As of January 2016, total parity is 101.01% (1.00% CE) and senior parity is 104.51% (4.31% CE). The trust has been releasing cash given the Specified Overcollateralization Amount equal to the greater of 1.0% of the adjusted pool balance and $2,000,000 is maintained.
Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of (i) 0.90% of the outstanding bond balance before May 2019 (steps down to 0.25% of the outstanding bond balance after May 2019) and $719,800, currently equal to $5,192,572.
Acceptable Servicing Capabilities: Day to day servicing is provided by Nelnet, Pennsylvania Higher Education Assistance Agency (PHEAA) and Great Lakes Educational Loan Services. In Fitch's opinion, all servicers are acceptable servicers of FFELP student loans.
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.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Dodd-Frank Rating Information Disclosure Form