DBRS Morningstar Finalizes Provisional Ratings on Upstart Securitization Trust 2019-3

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by Upstart Securitization Trust 2019-3 (UPST 2019-3):

-- $223,877,000 Class A Notes at A (sf)
-- $58,602,000 Class B Notes at BBB (low) (sf)

The ratings of the Notes are based on DBRS Morningstar’s review of the following considerations:

(1) The transaction’s form and sufficiency of available credit enhancement.
-- Subordination, overcollateralization, amounts held in the Reserve Account and excess spread create credit enhancement levels that are commensurate with the ratings.
-- Transaction cash flows are sufficient to repay investors under all A (sf) and BBB (low) (sf) stress scenarios in accordance with the terms of the UPST 2019-3 transaction documents.

(2) 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.

(3) The experience, sourcing and servicing capabilities of Upstart Network, Inc. (Upstart).

(4) The experience, underwriting and origination capabilities of Cross River Bank (CRB).

(5) Wilmington Trust National Association’s (rated AA (low) with a Stable trend by DBRS Morningstar) ability to perform duties as a Backup Servicer, and Systems & Services Technologies, Inc.’s ability to perform duties as a designated subagent.

(6) The annual percentage rate (APR) charged on the loans, and CRB’s status as the true lender.
-- All loans included in UPST 2019-3 are originated by CRB, a New Jersey state-chartered Federal Deposit Insurance Corporation–insured bank.
-- Loans originated by CRB are within the New Jersey state usury limit of 30.00%.
-- The weighted-average APR of the loans in the pool is 20.13%.
-- Loans may exceed individual state usury laws; however, CRB, as the true lender, is able to export rates that pre-empt state usury rate caps.
-- Loans originated to borrowers in states with active litigation—Second Circuit (New York, Connecticut, and Vermont); Colorado; Maryland; and West Virginia—are either excluded from the pool or limited to the usury cap in each respective state.
-- Under the Loan Sale Agreement, Upstart is obligated to repurchase any loan if there is a breach of a representation and warranty that materially and adversely affects the interests of the purchaser.

(7) The legal structure and legal opinions that address the true sale of the personal loans, the non-consolidation of the trust, that the trust has a valid perfected security interest in the assets, and consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Structured Finance Transactions, which can be found on dbrs.com under Methodologies & Criteria.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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