<SEC-DOCUMENT>0001193125-24-217193.txt : 20241122
<SEC-HEADER>0001193125-24-217193.hdr.sgml : 20241122
<ACCEPTANCE-DATETIME>20240911144456
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ACCESSION NUMBER:		0001193125-24-217193
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20240911

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Upstart Holdings, Inc.
		CENTRAL INDEX KEY:			0001647639
		STANDARD INDUSTRIAL CLASSIFICATION:	FINANCE SERVICES [6199]
		ORGANIZATION NAME:           	02 Finance
		IRS NUMBER:				464332431
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2950 S. DELAWARE STREET, SUITE 300
		CITY:			SAN MATEO
		STATE:			CA
		ZIP:			94403
		BUSINESS PHONE:		(650) 204-1000

	MAIL ADDRESS:	
		STREET 1:		2950 S. DELAWARE STREET, SUITE 300
		CITY:			SAN MATEO
		STATE:			CA
		ZIP:			94403
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">September&nbsp;11, 2024 </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>VIA EDGAR SUBMISSION </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange
Commission </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Office of
Technology </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street, N.E. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549 </P>
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<TD VALIGN="top">Attention:</TD>
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<TD VALIGN="top">Susan Block</TD>
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<TD VALIGN="top">Christian Windsor</TD>
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<TD VALIGN="top" ALIGN="right"><B>Re:</B></TD>
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<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Upstart Holdings, Inc.</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Form <FONT
STYLE="white-space:nowrap">10-K</FONT> for the Year Ended December&nbsp;31, 2023</B></P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman"><B>File
<FONT STYLE="white-space:nowrap">No.&nbsp;001-39797</FONT></B></P></TD>
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</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and Gentlemen: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On behalf of Upstart Holdings, Inc. (the &#147;<B>Company</B>&#148;), we are responding to the comments of the staff (the
&#147;<B>Staff</B>&#148;) of the Securities and Exchange Commission (the &#147;<B>Commission</B>&#148;) contained in its letter dated August&nbsp;13, 2024, to Sanjay Datta, the Company&#146;s Chief Financial Officer, regarding the above referenced
Form <FONT STYLE="white-space:nowrap">10-K</FONT> (the &#147;<B>Form 10</B><B><FONT STYLE="white-space:nowrap">-K</FONT></B>&#148;) filed on February&nbsp;15, 2024 (File <FONT STYLE="white-space:nowrap">No.&nbsp;001-39797).</FONT> </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In this letter, we have recited the comments from the Staff in bold and italicized type and have followed each comment with the Company&#146;s
response. References to &#147;we,&#148; &#147;our&#148; or &#147;us&#148; mean the Company or its advisors, as the context may require. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Annual Report
on Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the Fiscal Year Ended December</U><U></U><U>&nbsp;31, 2023 </U> </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Our AI Lending Models, page 8
</U></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>1. We note your disclosure that your AI models have increased in terms of the number of variables, the number of total data points. We also note
your discussion on page 90 that discusses the variable performances of different vintages of loans compared to the targeted performance rate. Please tell us, with a view towards revised disclosure, the factors that led lower than forecast
performance for recent vintages, despite the access to additional data. Similarly, please tell us how you determined that loans originated in 2023, which would have the least seasoning, are expected to revert to target level performance.
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">September&nbsp;11, 2024 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Page 2 of 3 </P>
<p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P>
 <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We consider credit performance of Upstart-powered loans to be one of the most important
measures of the effectiveness of our AI models. However, credit performance is impacted by multiple factors, including those our models do not predict, such as macroeconomic conditions. We have stated that we currently forecast vintages of core
personal loans that originated in the first quarter 2021 through the third quarter 2023 to underperform relative to their target returns. Even though our underwriting models have over time utilized more variables and data points about borrowers
which has improved model performance, they did not predict the severe impact of recent changes to macroeconomic conditions, credit market volatility and interest rate fluctuations, all of which were (and still are) beyond our control. The forecasted
underperformance reflects the impact of a combination of factors that occurred during that period, including the elimination of government stimulus measures and the worsening of the macroeconomic environment, such as rising inflation and the
resulting sharply higher interest rates. The macroeconomic conditions during that period led to more borrowers not making payments on their personal loans than anticipated by our models. For example, borrowers likely prioritized repayment of loans
that are secured by necessities, such as mortgages or auto loans, over unsecured personal loans. Higher interest rates also likely led to higher payment obligations, which reduced the ability of borrowers to remain current on their obligations.
These factors led to increased delinquencies, defaults and bankruptcies declared by borrowers, resulting in more charge-offs and fewer recoveries, all of which had an adverse effect on the credit performance of loans facilitated on our marketplace
during that time period. To respond to macroeconomic changes more rapidly, we introduced the Upstart Macro Index (&#147;<B>UMI</B>&#148;) in 2023, which estimates the impact that observed macroeconomic changes may have on credit performance for
Upstart-powered unsecured personal loans. The Company respectfully advises the Staff that it will revise its disclosure accordingly to address the Staff&#146;s comment. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We stated that the core personal loans that originated in the fourth quarter of 2023 or later are currently forecasted to deliver returns in
line with target yields. This reversion in credit performance expectations reflects a combination of factors, including increased conservatism in underwriting. Our most recent AI models benefited from more data on borrower repayment patterns in the
period of significant macroeconomic changes and resulted in substantive positive changes in observed and expected borrower repayments even for vintages with limited seasoning. This makes our more recent models more accurate than those used in early
2021. Also, the relative stabilization of macroeconomic conditions, as reflected in UMI, has helped credit perform in line with our model&#146;s predictions as there has been less unexpected volatility in macroeconomic factors impacting loan
performance. The Company respectfully advises the Staff that it will enhance its disclosure accordingly to address the Staff&#146;s comment. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">September&nbsp;11, 2024 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Page 3 of 3 </P>
<p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Our Ecosystem </U></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Value Proposition to Lending Partners and Institutional Investors, page 11</U> </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>2. We note that you permit your lending and institutional partners to control their programs when originating loans through your platform. Please tell
us, with a view towards enhanced disclosure, the extent to which your lending partners rely on your credit scoring model alone, rather than in conjunction with traditional income and credit scores to approve loans. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our lending partners continue to control their programs when originating loans through our platform, so do not solely rely on our models alone.
Each lending partner sets and approves its own underwriting policy that establishes certain credit underwriting requirements determined by the lending partner. These &#147;hard&#148; requirements or criteria may include, without limitation, minimum
FICO score, minimum verifiable annual income, and maximum debt to income ratio. Upstart applies the lenders&#146; hard criteria prior to feeding any information to its underwriting models. The majority of credit denials on the platform are due to
the lending partners&#146; hard criteria from their underwriting policies. Borrower applications that meet a lender&#146;s hard credit criteria are then assessed by a pricing model which takes into account the output of the Upstart risk scoring
model in addition to additional pricing requirements set by lenders, such as target return objectives and maximum allowable APR limits. This process allows our lending partners to leverage our technology within the scope of their existing
underwriting policies. The Company respectfully advises the Staff that it will enhance its disclosure accordingly to address the Staff&#146;s comment regarding our lending partners reliance on our models alone. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">* * * * * </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Please direct any
questions or comments with respect to the Company&#146;s responses to me at scott.darling@upstart.com. Thank you for your assistance. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top">Very truly yours,</TD></TR>
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<TD VALIGN="bottom">/s/ Scott Darling</TD></TR>
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<TD VALIGN="top">Scott Darling</TD></TR>
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<TD VALIGN="bottom">Chief Legal Officer</TD></TR>
</TABLE></DIV> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">cc:</TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left">Dave Girouard, Upstart Holdings, Inc. </P></TD></TR></TABLE>
<P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Sanjay Datta, Upstart Holdings, Inc. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Christopher Ing, Upstart Holdings, Inc. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Allison B. Spinner, Wilson Sonsini Goodrich&nbsp;&amp; Rosati, P.C. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Shannon R. Delahaye, Wilson Sonsini Goodrich&nbsp;&amp; Rosati, P.C. </P>
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