DBRS Morningstar Assigns Provisional Rating to Affirm Asset Securitization Trust 2021-Z2

DBRS, Inc. (DBRS Morningstar) assigned a provisional rating to the following notes (the Notes) to be issued by Affirm Asset Securitization Trust 2021-Z2 (Affirm 2021-Z2):

-- $260,000,000 Class A Notes at AA (sf)

The rating is 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, published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although COVID-19 remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks, but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to COVID-19 may nonetheless bring other risks to the forefront in coming months and years.

(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 proposed rating.

(3) Transaction cash flows are sufficient to repay investors under all AA (sf) stress scenarios in accordance with the terms of the Affirm 2021-Z2 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 2021-Z2 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 expected legal opinions that will 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.”

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 (October 20, 2021), 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.

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

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