DBRS Morningstar Finalizes Provisional Ratings on Affirm Asset Securitization Trust 2024-X1

DBRS, Inc. (Morningstar DBRS) finalized its provisional ratings on the following notes issued by Affirm Asset Securitization Trust 2024-X1 (Affirm 2024-X1):

-- $518,080,000 Class A Notes at AAA (sf)
-- $41,840,000 Class B Notes at AA (sf)
-- $41,480,000 Class C Notes at A (sf)
-- $33,130,000 Class D Notes at BBB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The credit ratings on the Notes are based on Morningstar DBRS' 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 credit ratings.
-- Transaction cash flows are sufficient to repay investors under all AAA (sf), AA (sf), A (sf), and BBB (sf) stress scenarios in accordance with the terms of the Affirm 2024-X1 transaction documents.

(2) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns March 2024 Update, published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(3) The experience, sourcing, and servicing capabilities of Affirm.

(4) The experience, underwriting, and origination capabilities of ALS, CRB, Celtic Bank, and Lead Bank.

(5) The ability of Nelnet Servicing to perform duties as a Backup Servicer.

(6) The annual percentage rate charged on the loans and CRB, Celtic Bank, and Lead Bank's status as the true lenders.
-- All loans in the initial pool included in Affirm 2024-X1 are originated by Affirm through its subsidiary ALS or by originating banks, CRB, Celtic Bank, and Lead Bank, New Jersey, Utah, and Missouri, respectively, state-chartered FDIC-insured banks.
-- Loans originated by ALS utilize state licenses and registrations and interest rates are within each state's respective usury cap.
-- Loans originated by CRB are all within the New Jersey state usury limit of 30.00%.
-- Loans originated by Celtic Bank are all within the Utah state usury limit of 36.00%.
-- Loans originated by Lead Bank are originated below 36.00%.
-- Loans may be in excess of individual state usury laws; however, CRB, Celtic Bank, and Lead Bank as the true lenders are able to export rates that preempt state usury rate caps.
-- The loan pool only includes loans made to borrowers in New York that have Contract Rates below the usury threshold.
-- Loans originated to borrowers in Iowa will be eligible to be included in the Receivables to be transferred to the Trust. These loans will be originated under the ALS entity using Affirm's state license in Iowa.
-- Loans originated to borrowers in West Virginia will be eligible to be included in the Receivables to be transferred to the Trust. Affirm has the required licenses and registrations that will enable it to operate the bank partner platform in West Virginia.
-- Affirm has obtained a supervised lending license from Colorado, permitting Affirm to facilitate supervised loans in excess of the Colorado annual rate cap, complying with Assurance of Discontinuance's (AOD's) safe harbor.
-- Loans originated to borrowers in Vermont above the state usury cap will be eligible to be included in the Receivables to be transferred to the Trust. Affirm has the required licenses and registrations in the state of Vermont.
-- Loans originated to borrowers in Connecticut have a Contract Rate below 12%.
-- Under the loan sale agreement, Affirm is obligated to repurchase any loan if there is a breach of 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 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 Morningstar DBRS Legal Criteria for U.S. Structured Finance.

Morningstar DBRS' credit rating on Class A, Class B, Class C, and Class D Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Interest Distributable Amounts, Unpaid Interest Distributable Amounts, and the related Note Balance.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the portion of Note Interest Shortfall attributable to interest on unpaid Note Interest for each of the rated notes.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (January 23, 2024).

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

The principal methodology applicable to the credit rating is Rating U.S. Structured Finance Transactions at https://dbrs.morningstar.com/research/431204/rating-us-structured-finance-transactions (April 15, 2024).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

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

Global Methodology for Rating CLOs and Corporate CDOs and the CLO Insight Model v1.0.1.0 (February 23, 2024)
https://dbrs.morningstar.com/research/428544/global-methodology-for-rating-clos-and-corporate-cdos

Rating U.S. Trade Receivables (October 5, 2022)
https://www.dbrsmorningstar.com/research/403636/rating-us-trade-receivables

Operational Risk Assessment for U.S. ABS Servicers (March 21, 2024)
https://dbrs.morningstar.com/research/430003/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (March 21, 2024)
https://dbrs.morningstar.com/research/430004/operational-risk-assessment-for-us-abs-originators

Legal Criteria for U.S. Structured Finance (April 15, 2023)
https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance