DBRS Morningstar Confirms Ratings on Fairstone Financial Issuance Trust I, Series 2019-1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following notes (the Notes) issued by Fairstone Financial Issuance Trust I (the Trust) as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants:

-- Series 2019-1 Class A Notes at AAA (sf)
-- Series 2019-1 Class B Notes at AA (sf)
-- Series 2019-1 Class C Notes at A (sf)
-- Series 2019-1 Class D Notes at BBB (high) (sf)

The Notes are backed by a diversified pool of Canadian, fixed-rate, amortizing, near- and non-prime, unsecured, and secured consumer loans. Secured loans are secured by a second-ranking (and in certain limited instances, a first-ranking) priority mortgage or immovable hypothec on real properties located across Canada.

The rating confirmation is based on the performance of the transaction as of October 2019:

-- The level of credit enhancement provided by subordination (30.2%, 17.6%, and 6.6% of the current note balance for the Class A, B, and C Notes, respectively), overcollateralization of 11.4% and a fully funded non-amortizing cash reserve of 1.4% are at their required levels and continue to provide support for the ratings assigned.

-- The gross yield and payment rate have been stable, averaging 29.2% and 6.0%, respectively since April 2019, when the series launched.

-- The three-month average net loss rate has also remained stable, averaging 3.7% since the series launched.

-- The experience of Fairstone Financial Inc. with respect to originating, underwriting, and servicing in the consumer loan industry.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 2019), which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

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.dbrs.com or contact us at [email protected].

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