DBRS Finalizes Provisional Ratings on FREED ABS Trust 2021-3FP

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) to be issued by FREED ABS Trust 2021-3FP (FREED 2021-3FP):

-- $113,890,000 Class A Notes at AA (high) (sf)
-- $52,880,000 Class B Notes at AA (sf)
-- $26,440,000 Class C Notes at A (low) (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical 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 assumptions consider the baseline macroeconomic scenario outlined in the commentary.
-- DBRS Morningstar's projected losses include the assessment of the impact of the coronavirus. The DBRS Morningstar CNL assumption is 12.92% based on the Cutoff Date pool composition.
-- DBRS Morningstar incorporated in its analysis a hardship deferment stress as a result of an increase in utilization related to the impact of the coronavirus on borrowers. DBRS Morningstar stressed hardship deferments to test liquidity risk early in the life of the transaction’s cash flows.

(3) The transaction’s form and sufficiency of available credit enhancement.
-- Subordination, overcollateralization, amounts held in the Reserve Fund, and excess spread create credit enhancement levels that are commensurate with the ratings.
-- Transaction cash flows are sufficient to repay investors under all AA (high) (sf), AA (sf) and A (low) (sf) stress scenarios in accordance with the terms of the FREED 2021-3FP 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, sourcing, and servicing capabilities of Freedom Financial Asset Management, LLC (FFAM).

(6) The experience, underwriting, and origination capabilities of Cross River Bank (CRB) and MetaBank, National Association (MetaBank) (together, the Partner Banks).

(7) The ability of WTNA to perform duties as a Backup Servicer and the ability of Firstmark to perform duties as a Backup Servicer Subcontractor.

(8) The annual percentage rate (APR) charged on the loans and the status of the Partner Banks as the true lenders.
-- All loans included in FREED 2021-3FP are originated by CRB, a New Jersey state-chartered FDIC-insured bank or MetaBank, a national bank.
-- Loans originated by CRB are all within the New Jersey state usury limit of 30.00%.
-- Loans originated by MetaBank are within the South Dakota state usury limit of 36.00%.
-- The weighted-average APR of the loans in the pool is 20.01%.
-- Loans may be in excess of individual state usury laws; however, the Partner Banks as the true lenders are able to export rates that preempt state usury rate caps.
-- Loans originated to borrowers in states with active litigation (Second Circuit (New York, Connecticut, Vermont), Colorado, West Virginia, and Maine) are excluded from the pool.
-- Under the Loan Sale Agreement, FFAM 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.

(9) The legal structure and legal opinions that address the true sale of the personal loans, the nonconsolidation of the trust, and that the trust has a valid perfected security interest in the assets and 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 and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is Rating U.S. Structured Finance Transactions (November 6, 2020), 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 info@dbrsmorningstar.com.

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