DBRS Morningstar Finalizes Its Provisional Ratings on Oportun Funding XIV, LLC, Series 2021-A

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following notes (the Notes) issued by Oportun Funding XIV, LLC, Series 2021-A (Oportun 2021-A or the Issuer):

-- $264,705,000 Class A Notes at AA (low) (sf)
-- $45,077,000 Class B Notes at A (low) (sf)
-- $41,241,000 Class C Notes at BBB (low) (sf)
-- $23,977,000 Class D Notes at BB (high) (sf)

The rating on the Notes is based on DBRS Morningstar’s review of the following considerations:

(1) The transaction’s assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: January 2021 Update,” published on January 28, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on January 28, 2021, and are reflected in DBRS Morningstar’s rating analysis.

(2) The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for the current rating. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.
-- DBRS Morningstar's projected losses include an additional stress due to the potential impact of the coronavirus. The DBRS Morningstar cumulative net loss assumption is 10.68% based on the worst-case loss pool constructed giving consideration to the concentration limits present in the structure.
-- DBRS Morningstar incorporated a hardship deferment stress into its analysis as a result of an increase in utilization related to the impact of the coronavirus pandemic on borrowers. DBRS Morningstar stressed hardship deferments to test liquidity risk early in the life of the transaction’s cash flows.

(3) The transaction’s form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the Reserve Account, and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar’s stressed assumptions under various stress scenarios.

(4) The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final payment date.

(5) Oportun's capabilities with regard to originations, underwriting, and servicing.

(6) The ability of Systems & Services Technologies, Inc. (SST) to perform duties as a Back-Up Servicer. SST, as Back-Up Servicer, is required to take over as successor servicer of the collateral in the Oportun 2021-A transaction within 15 calendar days of notice of a servicing termination event. SST and Oportun have developed a detailed servicing transition plan to facilitate an orderly transfer of servicing.

(7) On March 3rd, 2021, Oportun received a Civil Investigative Demand (CID) from the Consumer Financial Protection Bureau (CFPB). The stated purpose of the CID is to determine whether small-dollar lenders or associated persons, in connection with lending and debt-collection practices, have not been in compliance with certain federal consumer protection laws over which the CFPB has jurisdiction.
-- Oportun and PF Servicing believe that their practices have been in full compliance with CFPB guidance and that they have followed all published authority with respect to their practices, and Oportun intends to cooperate with the CFPB with respect to this matter. See Company Description in the rating report for more information regarding this matter. At this time, the Seller is unable to predict the outcome of this CFPB investigation, including whether the investigation will result in any action or proceeding or in any changes to the Seller’s or the Servicer’s practices.

(8) The legal structure and legal opinions that address the true sale of the unsecured consumer loans, the nonconsolidation of the trust, and 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.”

ESG CONSIDERATIONS
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/373262.

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

The principal methodology is Rating U.S. Structured Finance Transactions (November 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.dbrsmorningstar.com or contact us at [email protected].

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