Fitch Rates Prosper Marketplace Issuance Trust, Series 2018-1.
--$387,800,000 class A 'A-sf'; Outlook Stable;
--$112,000,000 class B 'BBB-sf'; Outlook Stable;
--$79,450,000 class C 'BB-sf'; Outlook Stable.
The class D notes are not rated by Fitch.
KEY RATING DRIVERS
Changes from Prior PMIT Deals: Structural changes to PMIT 2018-1 include the addition of class D notes to the capital structure and the inclusion of a prefunding period, subject to portfolio limits, spanning approximately six weeks, over which approximately 15% of the final collateral pool will be originated.
Collateral Quality: PMIT 2018-1 has a weighted average (WA) FICO score of 717, including 18.6% of non-prime borrowers with FICO scores below 680, improved from series 2017-3. Fitch assigned cumulative gross default (CGD) assumptions for the 36- and 60-month loans in this pool of 14.0% and 20%, respectively. These assumptions are unchanged (36-month) and lower by 0.25% (60-month) compared to 2017-3, despite the stronger pool, due to observations of weakening performance.
Recent Asset Performance: Recent Prosper loan vintages have underperformed expectations, consistent with much of the consumer sector. While Prosper and WebBank have implemented underwriting changes to improve performance within internal credit tiers, early delinquency data for the 2017 loans indicates performance in line with weaker historical periods such as the first half of 2016. To account for this, Fitch focused on the early 2016 period in its default assumption derivation to project future portfolio performance.
Limitations of Historical Data: While performance data is available since 2010, originations prior to 2013 are not representative of current origination volumes and underwriting practices. Fitch applied high default multiples of 3.3x and 2.7x for the 36- and 60-month loans, respectively, to address this risk.
Rating Cap at 'Asf': Fitch placed a rating cap on the notes at 'Asf' category, considering primarily the sector's untested performance throughout a full economic cycle. History for unsecured installment loans originated via online platforms such as Prosper's thus far has only been during benign macro environment. Furthermore, the underlying consumer loans are likely at or near the bottom of repayment priority for consumers, since repayment does not provide the consumer ongoing utility as auto loans, credit cards and cellphone plans do. The cap does not currently constrain the ratings.
Adequate Servicing Capabilities: Prosper will service the pool of loans, and Citibank, N.A., the named backup, has committed to a transfer period of 30 business days. Systems & Services Technologies (SST), the sub-backup servicer, will be responsible for the operations in the event of a servicer transition. Fitch considers all parties to be adequate servicers for this pool based on prior experience and capabilities.
Unanticipated increases in the frequency of defaults or write-offs on customer accounts could produce loss levels higher than the base case and would likely result in declines of CE and remaining loss coverage levels available to the investments. Decreased CE may make certain ratings on the investments susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
Rating sensitivities provide greater insight into the model-implied sensitivities the transaction faces when one or two risk factors are stressed while holding others equal. The modeling process first uses the estimation and stress of a base case loss assumption to reflect asset performance in a stressed environment. Second, structural protection was analyzed with Fitch's proprietary cash flow model. The results below should only be considered as one potential outcome as the transaction is exposed to multiple risk factors that are all dynamic variables.
--Default increase 10%: class A 'BBB+sf'; class B 'BB+sf'; class C 'B+sf';
--Default increase 25%: class A 'BBBsf'; class B 'BBsf'; class C 'B-sf';
--Default increase 50%: class A 'BB+sf'; class B 'B+sf'; class C 'CCCsf';
--Recoveries decrease to 0%: class A 'BBB+sf'; class B 'BB+sf'; class C 'B+sf'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from Deloitte. The third-party due diligence focused on performing comparisons and re-computations of loan characteristics for a randomly selected sample of 245 loans in the statistical pool. Fitch considered this information in its analysis, and it did not have an impact on its analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained at the end of the related rating action commentary (RAC).
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in "Prosper Marketplace Issuance Trust, Series 2018-1 - Appendix." These R&Ws are compared to those of typical R&Ws for the asset class as detailed in the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" published in May 2016.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jun 21, 2018|
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