Timing Matters.

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Subprime Auto Loan Crisis Chronometer

Crisis /krīsis/: A turning point that results in a battle over loss allocation.

Will there be a crisis? Are we near one?

Practices and factors similar to those contributing to the subprime mortgage meltdown are now impacting subprime auto lending and related ABS. The gauges reflect our take on how they are impacting risks for lenders and investors.

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The Subprime Auto Loan Crisis Chronometer shows the risk of battles over loss allocation.
Jun 2018
Lending Practices and Factors i
Subprime and deep subprime lending and securitization have risen sharply; delinquencies are on the rise, but not yet above peak levels. Risky practices exposing specific lenders and their investors to losses; other lenders will be similarly exposed if they chase market share.
ABS Practices and Factors i
Credit enhancements such as excess spread, overcollateralization and subordination continue to create a buffer from riskiest lending practices. Investors have not yet felt the sting of riskiest practices.
Auto Market Risks i
New vehicle prices are at all-time highs, but sales incentives and high supply of off-lease vehicles are depressing used vehicle prices, accelerating depreciation and driving up negative equity on trade-ins. Advances in technology will likely accelerate depreciation further.

Timing Matters.

Stay Ahead with Credit Chronometer.

Featured Post

Last week, Joseph Cioffi was a featured speaker at the iiBig 10th Annual Education Finance & Loan Symposium in Alexandria, Virginia.  He participated in a panel regarding the latest trends and issues impacting collections and also moderated a panel on valuation and trends in student loan securitizations.  Below, he shares key takeaways from the conference and shares insights from his fellow panelists. The conference was highly informative, including the insights of the experts on the valuation…

Latest Posts

Historically, investors in subprime auto asset-backed securities (ABS) have been able to sleep well at night. They have rested easy in part because credit enhancements in securitizations have protected them from losses.  Today, due in large part to the safety expected from credit enhancements, rumblings about the parallels between subprime auto lending and pre-financial crisis subprime mortgage lending – and the cataclysmic end those parallels could portend – have barely disturbed the subprime auto ABS market.

Overcollateralization (O/C) rates are often touted as particularly protective for subprime auto ABS.  It’s true, of course: As investors have rightfully demanded greater O/C rates on riskier pools,…

Originations and Issuances, by the Numbers

Student loan debt rose to $1.52 trillion in Q1 2018, up from $1.44 trillion a year earlier, and now accounts for 10.7% of the $13.21 trillion in total household debt, based on Federal Reserve Board of Governors and Federal Reserve Bank of New York data.

According to a report issued by DBRS, $16.7 billion in student loan asset-backed securities (SLABS) were issued in 2017, up 10% versus a year ago. Of the total 2017 SLABS issuance, student loan refinance (refi) ABS issuances were $5.2 billion,…

Joseph Cioffi and James Serritella discuss the heavyweight fight brewing between federal and state authorities over whose rules should govern the servicing of student loans in their latest article published in Law360. In “Federal Vs. State: The Fight To Regulate Student Loans,” the authors note that the battle appears headed for the courts, where the outcome will likely depend upon judicial interpretation of the preemption doctrine.  To read the full article, click here.

College students – prepare to be educated on a new case of Hobson’s choice, a term typically used to describe situations where there appears to be a choice available, but in reality, there is no choice at all.  It’s named after a stable owner in England who rented out horses, but would only offer customers the horse nearest the stable door.  But this time around, the concept is reflected in a proposed bill that would offer student loan borrowers debt elimination in exchange for delaying their Social Security qualifying age.  Whether they take the deal or continue to repay their loans in full,…

Joseph Cioffi recently sat down with William Hoffman, Associate Editor of Auto Finance News, for an episode of “The Roadmap,” a podcast from the Center for Auto Finance Excellence, a site dedicated to providing best practices for auto finance industry executives and investors. Joseph and William discussed trends apparent in recent subprime auto loan securitizations, and the outlook for the market going forward, including a close look at the interrelationships between credit enhancements, credit quality and credit ratings.

The discussion builds on Joseph’s thoughts first shared on a post on Credit Chronometer….

Wells Fargo is being put on a highly restrictive diet by the Federal Reserve and won’t get any relief until its compliance and governance shape up.  Under the terms of the Fed’s Consent Order, Wells cannot grow its consolidated assets beyond the total consolidated assets reported at the end of 2017.  Although Wells is dismissing the effect of the Order as a nothingburger, if there’s really no effect, it’s probably because Wells already lacks opportunity for growth in deposits and lending as a result of its recent scandals and the massive consumer distrust that has followed. …