Independent rating agency DBRS detailed an in-depth look at new asset-level data provided within its database of publicly issued auto ABS transactions — and the risks associated with these pools — in a report released this month.
Starting in November 2016, lenders issuing public auto ABS transactions were required to disclose loan-level data about the borrower and to update it on a regular basis. Nearly a year into this reporting process, investors are starting to see initial findings such as average APR, payment-to-income ratios, credit score, and loan-to-value ratios.
Fourteen auto ABS trusts have issued 31 transactions through September, according to DBRS. This first report — titled Figures on Automotive Securitization Tapes (FAST) — incorporates 20 of those transactions through July as the rating agency waits until the deals have at least three months of reporting history.
The aggregate metrics put numbers to some of the trends the industry has been following for years. For example, average loan terms in the pools extended to 70 months or higher for consumers with Fico scores of 679 or lower.
APR on the loans was highly concentrated at 0% interest, suggesting that captives are still heavily pushing new-vehicle sales. However, delinquencies among 0% APR loans were the lowest compared to all higher interest rate deals. Consumers paying off loans with an APR of 16% or higher were far more likely to fall into delinquency, as one might expect when accounting for risk.
Delinquencies among payment-to-income groups were evenly scattered in the first report, but it will be particularly interesting to see how this new metric changes overtime and what it can tell investors and the public about the quality of the loans.
On a more granular level, American Honda Finance Corp. and Toyota Financial Services both held the highest rate of delinquency among consumers with Fico scores of 620 to 679 — even more so than their subprime borrowers. Financial institutions have been targeting near-prime consumers this year and it could be a sign that they are willing to take more risk to capture that business.
For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.