The largest asset-backed securities deal since prior to the mortgage crisis, worth $1.6 billion, was announced last week. Meanwhile, one ratings agency is touting their low delinquencies as positive signs in the ABS market.
The subprime mega deal was reportedly helmed by Santander, a major Spanish bank that is also Chrysler’s lending partner. Recent developments have had many observers questioning whether Chrysler’s phenomenal sales boom in 2012 was in fact spurred on by subprime loans. Credit rating agency Experian said that nearly 30 percent of new car loans issued by Chrysler went to subprime buyers. Meanwhile, a Top 10 car list for subprime buyers compiled by one online lender showed that Chrysler products made up 40 percent of the list.
Meanwhile, ratings agency Fitch was rosy in its outlook of ABS products, noting that
Both losses and delinquencies declined across prime and subprime auto ABS even as used vehicle values softened and are expected to moderate further this year. Subprime 60+ day delinquencies fell to 3.02% in March from 3.65% in the prior month, dropping 17% both on a MOM (month over month) and YOY (year over year) basis. Subprime ANL (annualized net losses) were 3% down in March to 5.36% from 5.53% in February. On a YOY basis, subprime ANL were still 14% higher in last month versus March 2012.
Our usual grain of salt comes in the form of cautious practices on the part of Fitch. The agency has been more conservative than most in rating subprime ABS deals, to the point where Fitch has been excluded from rating deals that some observers have considered rather risky.