Santander Consumer USA‘s third asset-backed securitization of the year is bringing $1.2 billion auto loans to market in a deal that’s expected to close Aug. 21, according to a presale report by S&P Global Ratings issued today. The deal props up the subprime lender’s ABS volume to $3.4 billion this year, a 10.5% year-over-year decline.
The managed portfolio’s performance showed “slightly worse” delinquency and net loss rates, S&P noted. Delinquencies increased 70 basis points year over year, to 14.5%. Net losses were up 60 basis points to 8.4%.
The uptick in losses is attributable to servicing policy changes SCUSA made in late 2018, that involved performing fewer modifications, S&P noted. “As a result, a negative impact on gross charge-offs occurs upfront, since this accelerates the loans that would have been charged off after the modification period,” according to the report. “This affects the shape of the vintage loss curve to realize higher losses on the front end.”
To that end, S&P expects cumulative net losses for the securitization to increase as high as 16.2%.
SCUSA had $26.3 billion loans outstanding at midyear, a 3.4% decrease compared with the prior-year period.
