Subprime ABS Market Still on the Rise

By  Larissa Padden     lpadden@royalmedia.com

      Diana Asatryan    dasatryan@royalmedia.com

The subprime auto market has attracted a lot of attention in recent years, and two specific top-tier lenders have made moves to maintain a foothold in the subprime ABS space, according to recent ABS offerings. 

Santander Consumer U.S.A. (SCUSA) has increased its focus on lower credit borrowers in its latest ABS issuance. The Santander Drive Auto Receivables Trust (SDART) 2015-5 brings to market $794.12 million in securities backed by retail installment sales contracts for new and used automobiles and light-duty trucks, according to a pre-sale report from Standard & Poor’s, released last week.

The rating agency inched up its expected cumulative net loss range to 15.50%-16.25% from 15.25%-16.00%, due to increased portion of longer-term loans, as compared to the previous SDART transaction rated by S&P. The percentage of 73-75-month loans increased to 15.20%, up from 8.28%, and the custom score on these loans decreased to 530 from 549.

Exeter Adds to The Pipeline

Exeter Finance Corp. also came to market last week with a $300 million ABS issuance – its third this year – also backed by subprime auto loans. The loans in the 2015-3 trust have a weighted average Fico of 579, up slightly from 569 in the previous trust. However despite the small uptick, loans in the pool with no Fico score increased to 6.64%, up from 2015-2’s 3.71%, according to a presale report from Standard & Poor’s.

Unlike SCUSA, Exeter’s latest issuance showed a decrease in loans with term of 61-72 months, down to 88.8% from 90.06%, yet the report also states that “origination static pool data currently shows that 61-72 month term loans have performed slightly better than 60-month and shorter loans.”

Total delinquencies increased to 14.17% as of June 30, from 12.96% a year earlier. “Delinquencies continued to climb during Exeter’s rapid-growth phase despite various staffing changes, technology upgrades, and another servicing center opening in Clearfield, Utah in June 2014,” S&P wrote in the report.

SCUSA and Exeter, together with General Motors Financial Co., accounted for 73% of subprime securitization issuances at the half-year mark of 2015, Amy Martin, senior director structured finance ratings group at S&P said during Nonprime Auto Financing conference in June.

For more content like this, check out the upcoming Auto Finance Summit, October 21-23 at Wynn Las Vegas. Visit www.AutoFinanceSummit.com for more information.