Click here to read article
Tuesday, November 4, 2014
Monday, November 3, 2014
Fitch Expects Subprime ABS Performance to Soften
Subprime auto ABS losses reached the highest level in four years last month, according to the latest quarterly auto ABS index from Fitch Ratings. The report also said used vehicle values have fallen for five straight months.
Despite the jump over the past quarter, asset performance remains on track within Fitch’s initial forecasts to date. That said, subprime ABS performance will likely be softer moving into late 2014 and early 2015, according to the company.
The report also indicated used vehicle values have fallen for five straight months.
“While still healthy, the wholesale auto market will be pressured from rising volumes into 2015,”said Senior Director Hylton Heard in an email statement.
Recent vintages continued to see YOY increases in losses. Losses on the 2010–2011 vintages are tracking at approximately 9.5% while the 2012–2013 vintages have projections of 10.0%–10.5% to date.
Fitch said recovery rates on subprime securitizations have been softer because of the softening wholesale vehicle market. The ratings agency said it will continue to closely watch collateral trends and wholesale vehicle market conditions in late 2014.
Meanwhile, Fitch noted that Federal bureaus have begun investigations into subprime lenders over concerns over the lending practices of subprime originators. Santander Consumer USA and General Motors Financial received such subpoenas. Nonetheless, Fitch so far believes the regulatory investigations will not negatively impact those company’s outstanding transactions.
Primed and Ready
On the prime side, losses and delinquencies rose in 3Q14, driven by seasonal pressures and shifting collateral trends. But levels observed have been within expectations and remained low relative to historical experience.
On the prime side, losses and delinquencies rose in 3Q14, driven by seasonal pressures and shifting collateral trends. But levels observed have been within expectations and remained low relative to historical experience.
The overall climb in delinquencies and losses for U.S. auto ABS during third-quarter 2014 followed the typical fall season patterns, Fitch said, indicating the slowdown will likely to continue this quarter and into next year. Although delinquency and loss levels were higher than a year ago, losses were still well within historical levels and in line with the solid 2005–2006 period.
Lease residuals are also seeing some pressure. Auto lease ABS residual values losses rose in 3Q’14, with some platforms now seeing losses for the first time in several years. Fitch’s RV Index declined to a 2.1% gain through 3Q2014, down from 8.4% through Q2.
Auto lenders are all competing for marketshare as car sales hovered at 16.5 million units. Not surprisingly, that increased market competition is contributing to the recent market volatility.
“With auto lenders jostling for market share, both underwriting and credit quality will suffer if lenders look to expand share and grow their portfolios aggressively,” said Heard.
SEC Requests Subprime ABS Documents From Ally
Ally Financial Inc. recently received a document request from the U.S. Securities and Exchange Commission in connection with an investigation related to subprime automotive finance and related securitization activities, the company said in 10-Q filing today.
An Ally spokeswoman wouldn’t comment much beyond what was revealed in the filing. “Ally has been requested to provide data and records relating to our auto finance activities and will respond accordingly to the SEC,” Ally spokeswoman Gina Proia wrote in an email to Auto Finance News.
Since 2013, Ally Financial has issued $6.7 billion in asset-backed securities, according to data from Deutsche Bank Securities Inc.
All SEC investigations are conducted privately, according to the SEC website. Typically, the SEC’s Enforcement Division obtains evidence of possible violations of securities laws from sources including market surveillance activities, investor tips and complaints, other divisions and offices of the SEC, the self-regulatory organizations, and other securities industry sources and media reports.
This latest move by a regulatory agency comes on the heels of last week’s revelation by General Motors Financial Co. in a 10-Q that it had been served with “additional investigative subpoenas to produce documents from state attorneys general and other governmental offices relating to our subprime auto finance business and securitization of subprime auto loans.”
Subscribe to:
Comments (Atom)