Cross River Bank securitises $100m in marketplace loans
US marketplace lending platform (MLP), Marlette Funding, and Cross River Bank (CRB) have announced the completion of a $100m securitisation transaction. CRB and Marlette share the 12.5% equity tranche with Deutsche Bank acting as the lender in what is thought to be the first completed jointly by an FDIC insured bank and a MLP. CRB CEO, Gilles Gade said, ﻿ "We believe this strategy will set new industry standards of best business practices and broaden the appeal of MPL players...”

Cross River Bank, an early and active player in marketplace lending, closed a major deal to securitize $100 million in marketplace loans, the bank announced Friday.

Marketplace lending is a small but massively expanding sector– Lending Club has facilitated more than $11 billion in loans since its founding in 2006, Prosper and SoFi are closing in on $5 billion, and the list goes on — but securitization of those loans is still in its infancy.

The majority of the loans are prime or near-prime borrowers consolidating credit card debt, which has led some industry watchers to characterize marketplace lenders as mere proxies of the card issuers. Others argue that the onboarding and servicing of these loans is so superior that for customers at least, marketplace lending signals a clear leap forward.

This securitization marks the first joint transaction by a marketplace lender, Marlette Funding, and an FDIC-insured bank, Cross River Bank. Marlette and CRB will share a 12.5% equity tranche in the issuance, according to a report by Lend Academy.

Marlette Funding operates its loan business under the name Best Egg, and has originated about $1 billion worth of loans in the past 15 months. Leading up to this transaction, CRB has been keeping about 10% of Marlette originations on its balance sheet, and Marlette has been retaining an undisclosed portion of its loans on its balance sheet as well. Retaining risk in this way is not standard procedure for banks and marketplaces participating in these loans. Instead, the loans are typically taken on by secondary investors, but CRB and Marlette indicated to Lend Academy that they believe “having skin in the game” constitutes the best practice for the industry.

Marlette indicated it expects to perform similar transactions every three to six months going forward, with CRB as well as other participants in Best Egg loans.

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