DBRS Morningstar Finalizes Provisional Ratings on Lendmark Funding Trust 2022-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the classes of notes issued by Lendmark Funding Trust 2022-1 (Lendmark 2022-1), as follows:

-- $220,640,000 Class A Notes at AAA (sf)
-- $33,460,000 Class B Notes at AAA (sf)
-- $49,980,000 Class C Notes at AA (high) (sf)
-- $27,660,000 Class D Notes at A (sf)
-- $68,270,000 Class E Notes at BBB (low) (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:
-- 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 Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. Despite several new or increasing risks, including the Russian invasion of Ukraine, rising inflation, and new coronavirus variants, the overall outlook for growth and employment in the United States remains relatively positive.
-- DBRS Morningstar's projected losses do not include any additional stress from the coronavirus impact; The DBRS Morningstar cumulative net loss assumption is 9.50% based on the worst-case loss pool constructed, giving consideration to the concentration limits present in the structure.
--This is the first DBRS Morningstar AAA (sf) rated transaction for the Lendmark ABS platform. The AAA (sf) rating is supported by the sustained decrease of in-branch customer cash payments, which have been below 20% since early 2020. This trend has been supported by shifting consumer payment behavior that has accelerated and sustained itself since the onset of the coronavirus pandemic.
--Lendmark will be providing additional reporting on a monthly basis to the Backup Servicer. Among other data points, these reporting items identify how the borrower made their last payment. This information will likely be useful in an unexpected scenario where servicing responsibilities are transferred to the Backup Servicer.
-- The transaction’s form and sufficiency of available credit enhancement.
-- Overcollateralization, note subordination, reserve account amounts, and excess spread create credit enhancement levels that are commensurate with the proposed ratings.
-- 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 maturity date.
-- Lendmark’s capabilities with regard to originations, underwriting, and servicing.
-- The credit quality and performance of the Lendmark’s consumer loan portfolio.
-- DBRS Morningstar has performed an operational review of Lendmark and considers the entity an acceptable originator and servicer of unsecured personal loans with an acceptable back-up servicer.
-- The legal structure and legal opinions that address the true sale of the assets, the nonconsolidation of the trust, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar's “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.

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

The principal methodologies are Rating U.S. Structured Finance Transactions (April 4, 2022) and Rating U.S. Credit Card Asset-Backed Securities (August 9, 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.

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 info@dbrsmorningstar.com.

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