A pool of unsecured consumer loans will collateralize a $232.8 million asset-backed securities deal, to be issued through the FREED ABS Trust 2002-1FP, a transaction sponsored by Series B, out of the Freedom Consumer Credit Fund, an affiliate of Freedom Financial Asset Management.
Freedom Financial Asset Management is one of three subsidiaries of the Freedom Financial Network, which provides debt settlement services to consumers, according to Morningstar | DBRS.
This particular deal will only include loans from the FreedomPlus loan program, and were originated by either Cross River Bank of New Jersey or MetaBank National Association.
Slated to close on January 26, the transaction will issue notes through four classes on a sequential pay structure, according to Kroll Bond Rating Agency.
Once class A notes receive principal payments in full, classes B, C and then D will receive payments, KBRA said.
DBRS expects to assign ratings of ‘AAA’ through ‘A’ on classes A through C. Kroll Bond Rating Agency, meanwhile, expects to assign ratings of ‘AAA’ through ‘A-’ on the same classes, plus a ‘BBB-’ rating on the $36.3 million class D notes.
All notes are slated to reach legal final maturity on March 19, 2029. Freedom Financial Asset Management will service the notes, while Wilmington Trust is slated to act as backup servicer, plus a number of other roles, including collateral agent, indenture trustee and paying agent, according to KBRA.
In addition to subordination, FREED ABS Trust 2002-1FP employs overcollateralization, excess spread and a cash reserve account to help the notes maintain payments to investors.
Initial overcollateralization is 15%, with the ability to build up to a target equal to the minimum of 21.5% of the current pool balance, and 16.5% of the initial pool balance. This is subject to a floor equal to 2.0% of the initial pool balance.
The cash reserve accounts starts from nothing – 0.0% of the initial pool balance. It will build to a target equal to 1.0% of the initial pool balance, however. In terms of excess spread, gross excess spreads before losses is about 12.6%, based on a weighted average contract rate of 16.1%, minus 1.0% servicing fees and a weighted average life adjusted note coupon of 2.5%.
The 13,268 loans in the pool have an average balance of $20,650. On a weighted average basis the loans have a coupon of 16.1%, and an original FICO score of 698, KBRA said.
