DBRS Morningstar Finalizes Provisional Ratings on FREED ABS Trust 2020-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by FREED ABS Trust 2020-1 (FREED 2020-FP1):

-- $247,000,000 Class A Notes at A (high) (sf)
-- $45,350,000 Class B Notes at BBB (high) (sf)
-- $48,420,000 Class C Notes at BB (low) (sf)

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

(1) 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 proposed ratings.
-- Transaction cash flows are sufficient to repay investors under all A (high) (sf), BBB (high) (sf), and BB (low) (sf) stress scenarios in accordance with the terms of the FREED 2020-FP1 transaction documents.

(2) 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.

(3) The experience, sourcing, and servicing capabilities of Freedom Financial Asset Management, LLC (FFAM).

(4) The experience, underwriting, and origination capabilities of Cross River Bank (CRB).

(5) The ability of Wilmington Trust National Association (rated AA (low) with a Stable trend by DBRS Morningstar) to perform duties as a Backup Servicer and the ability of Nelnet Servicing, LLC d/b/a Firstmark Services to perform duties as a Backup Servicer Subcontractor.

(6) The annual percentage rate (APR) charged on the loans and CRB’s status as the true lender.
-- All loans included in FREED 2020-FP1 are originated by CRB, a New Jersey state-chartered Federal Deposit Insurance Corporation-insured bank.
-- Loans originated by CRB are all within the New Jersey state usury limit of 30.00%.
-- The weighted-average APR of the loans in the pool is 21.32%.
-- Loans may be in excess of individual state usury laws; however, CRB as the true lender can export rates that preempt state usury rate caps.
-- Loans originated to borrowers in states with active litigation (Second Circuit (New York, Connecticut, Vermont), Colorado, and West Virginia) are excluded from the pool.
-- The FREED 2020-FP1 loan pool includes loans originated to borrowers in Maryland, a state with active litigation. DBRS Morningstar incorporated an additional stressed cash flow analysis assuming that loans to borrowers in Maryland with APRs above the state usury cap of 24.00% were subsequently reduced to the state usury cap. Transaction cash flows are sufficient to repay investors under all A (high) (sf), BBB (high) (sf), and BB (low) (sf) stress scenarios.
-- Under the Loan Sale Agreement, FFAM must repurchase any loan if there is a breach of a 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 personal loans, the non-consolidation of the trust, that the trust has a valid first-priority security interest in the assets, and consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

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

The principal methodology is Rating U.S. Structured Finance Transactions, which can be found on dbrs.com under Methodologies & Criteria.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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