DBRS Morningstar Finalizes Provisional Rating on Affirm Asset Securitization Trust 2022-Z1Consumer Loans & Credit Cards
DBRS, Inc. (DBRS Morningstar) finalized its provisional rating on the following notes (the Notes) issued by Affirm Asset Securitization Trust 2022-Z1 (Affirm 2022-Z1):
-- $356,000,000 Class A Notes at AAA (sf)
-- $15,450,000 Class B Notes at BBB (sf)
The ratings are based on DBRS Morningstar’s review of the following considerations:
(1) The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns - March 2022 Update, published on March 24, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. Despite several new or increasing risks including Russian invasion of Ukraine, rising inflation and new COVID-19 variants, the overall outlook for growth and employment in the United States remains relatively positive.
(2) The transaction’s form and sufficiency of available credit enhancement.
-- Available credit enhancement consisting of overcollateralization, amounts held in the reserve account, and a form of excess spread are commensurate with the ratings.
(3) Transaction cash flows are sufficient to repay investors under all AAA (sf) and BBB (sf) stress scenarios in accordance with the terms of the Affirm 2022-Z1 transaction documents.
(4) Structural features of the transaction that require the Notes to enter into full turbo principal amortization if certain triggers are breached or if credit enhancement deteriorates.
(5) The experience and sourcing capabilities of Affirm, Inc.
(6) The experience, underwriting, and origination capabilities of Cross River Bank (CRB), Celtic Bank, and Affirm Loan Services LLC (ALS).
(7) Nelnet, Inc.’s (rated BBB (low) with a Stable trend by DBRS Morningstar) ability to perform duties as a Backup Servicer.
(8) All loans in the initial pool included in Affirm 2022-Z1 are originated by CRB and Celtic Bank, state-chartered Federal Deposit Insurance Corporation-insured banks based in New Jersey and Utah, respectively, or originated directly by Affirm
through its subsidiary, ALS.
(9) The noninterest bearing loans in the pool and CRB and Celtic Bank’s status as the true lenders.
(10) The legal structure and legal opinions that address the true sale of the unsecured consumer loans, the nonconsolidation of the trust, that the trust has a valid perfected security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
All figures are in U.S dollars unless otherwise noted.
The principal methodology is Rating U.S. Structured Finance Transactions (April 4, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.
The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
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