Pockets of Problems
By and large, the auto finance industry has much to showcase. When it comes to credit quality, auto loans have certainly outperformed mortgages, and the capital markets have already begun to turn a kinder eye to the auto sector in recent weeks.
This is true only in most cases. There are concentrations of problematic auto loans, and one such pocket evidently did in a credit union last week:
The National Credit Union Administration approached United about taking over Clearstar, and the two institutions announced the purchase Friday.
Now United is working to revise that auto loan program to meet standards the credit union has for its loans in Michigan, Nelson said.
“Their policies were very liberal on the amount of money they would loan on collateral,” he said. “And their rates were probably too low for the risk that was involved.”
I fear we’ll see more of such failures at the hand of errant auto lending, particularly stemming from the 2007 vintage. The banking system is bulging with teetering banks, and I suspect more than just Clearstar FCU played it fast and loose in auto finance. These are nothing more than pockets of problems to be sure, but problems nonetheless.
