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Permalink Reply by Amy Martin on October 11, 2011 at 9:37pm

JJ,

I thought I'd share some interesting historical facts with you. Before the crisis, subprime auto loan ABS reached a peak of $21.4bn. That was in 2006 when vehicle sales totaled 16.5 million units. At that time subprime issuance represented 24% of  total retail auto loan ABS issuance. The top 5 issuers then in order were: Capital One, AmeriCredit, HSBC, Triad, and Drive (now Santander).  Year to date through 9/30/2011, subprime auto loan ABS has totaled approximately $9.25bn, which is approximately 24% of the overall total of $38.55bn.  Due to consolidation and banks finding securitization less attractive than in the past, AmeriCredit and Santander Consumer are the largest ABS issuers to date.  There are several other players though who have accessed the market, some with long ABS track records and some newer entrants. 

 

Overall, subprime auto loan ABS issuance is up over 30% to $9.25bn from approximately $6bn for the first nine months of 2010.  We expect continued growth in subprime originations and securitization volume this year as liquidity and capital have returned to this market.  In the near term this will allow traditional players to return to historical origination volumes; however, in the medium term (if history repeats itself) this will create an intensely competitive environment and with it liberalization of credit standards.  We're keeping our eyes open for this, but so far haven't seen a return to the liberal credit standards that were in place in 2007 and first 8 months of 2008.

 

 

Permalink Reply by JJ Hornblass on October 12, 2011 at 9:57am

That's interesting, Amy, thanks. I noticed that there has been a notably decline in securitized automotive lending and leasing assets on finance company balance sheets through July, according to Federal Reserve data. The implication of what you are saying above is that that number should increase, which is good for auto finance in general.

Liquidity is really an issue I am curious about. I've heard about some asset classes that have been stuck since the European crisis truly intensified, and if you look at overall credit spreads, they seem to continue to elevate (although not so far today, as it turns out). What with loss levels so low for auto assets these days, I'm not sure looser underwriting should be such a grave concern.

Permalink Reply by Amy Martin on October 12, 2011 at 5:22pm

Spreads are widening in auto loan ABS, but we're seeing this in non investment grade corporate debt too.

I've attached an article that shows how spreads have widened in non investment corporates and compares that widening to the post Lehman widening in spreads.

Yes, losses are at low levels and this is not of great concern today.

 

Attachments:

• CreditTrendsRecentExpansionInCreditSpreadsShowsBondMarketStressButLessSevereThanDuringTheFinancialCrisis.pdf, 512 KB