Both prime and subprime ABS losses are trending higher, according to Fitch Ratings: subprime annualized net losses (ANL) rose, for the fifth consecutive month, to 8.05%, while prime losses reached a four-year high of 0.53%.
However despite the weaker performance in subprime, auto loan securitizations rated by Fitch are performing “well within initial expectations heading into the end of the year,” the company said. Subprime ANL remain below peak recessionary levels recorded in late 2008 to early 2009, when losses reached 10% to 13%, according to Fitch.
Subprime delinquencies of 60-plus days rose to 4.56% in October, up 13.4% higher versus October 2014, yet still below the peak delinquency range of 4.75%-5.10% recorded during the recent recession.
On the opposite end of the credit spectrum, 60-day prime delinquencies reached 0.38%, with delinquencies “only 5.6% higher last month versus a year earlier,” Fitch said.
“Looser underwriting, including lower FICO scoring, higher loan-to-values (LTV), and extended loan terms witnessed in 2013-2014 vintage securitized ABS pools are contributing to softer asset performance in late 2015,” the ratings agency wrote.
However, solid used vehicle values in the later part of 2015 have helped support ABS performance, with the Manheim Used Vehicle Value Index at 125.3 in October. The index was also on the rise for five consecutive months, during a period which is typically the weakest of the year, Fitch said.
Fitch’s auto ABS indices currently comprise $92.2 billion in outstanding notes, of which prime auto loan ABS comprises 61%, while subprime ABS comprises 39% of the total dollar amount.
