What “seasoning” means
In a BHPH portfolio, seasoning generally refers to how long an account has been active and how much actual payment history has accumulated since origination. A newly originated contract may have very little performance history. A more seasoned account gives a buyer more observed behavior to review.
Why buyers care about payment history
Potential buyers are purchasing future cash flows, so they typically want to understand whether borrowers have demonstrated an ability and willingness to make payments. Seasoning can help provide that evidence, but buyers may also evaluate delinquency patterns, payment frequency, remaining principal, remaining term, collateral, documentation, and other portfolio characteristics.
May provide less performance history for a buyer to evaluate and may fit fewer buyer programs.
Provide an established payment record, although seasoning alone does not guarantee eligibility or pricing.
The quality of the history can matter as much as the number of months an account has been open.
Different buyers can have different minimum seasoning and performance requirements.
More seasoning is not automatically better
A heavily seasoned account may also have a lower remaining balance or shorter remaining term. That means there is no universal “best” number of months. The objective is to match the characteristics of the available accounts with buyers whose current criteria fit the portfolio.
What to have ready
For an initial discussion, dealers can usually start with non-sensitive summary information such as number of accounts, approximate principal balance, average seasoning, general payment performance, geography, and whether the contemplated sale is partial or full.