Subprime lender Consumer Portfolio Services Inc. increased its concentration of higher credit tiers in its latest auto securitization, according to a presale report by S&P Global.
CPS Auto Receivables Trust 2018-A is backed by $190 million in subprime auto loan receivables with an expected loss rate of 18% to 19%.
Notably, the percentage of loans originated in Consumer Portfolio’s top four credit tiers increased to 74.6%, up from 73.6% in the 2017-D transaction. Meanwhile, the percentage of loans originated under CPS’ lower credit tiers decreased to 25.4% from 26.4%.
Additionally, the percentage of loans with original terms of 60 to 72 months also increased to 80.5% compared with 79% for the prior transaction, while seasoning remained at 60 months.
Despite the increased concentration of top-tier credit, the weighted average Fico of the 2018-A trust was 572, down from 573 in the 2017-D issuance. Notably, the latest issuance’s average Fico is up from 567 in the year-ago 2017-A transaction.
“In our view, the series 2018-A collateral characteristics are generally similar compared to those of series 2017-D,” S&P wrote in the report. “The series 2018-A pool will include loans in areas affected by hurricanes Harvey (3.1% of the initial pool in Texas) and Irma (4.9% of the initial pool in Florida). Similarly, loans from areas affected by the fires in California represent 1.2% of the initial pool balance.”
However, S&P expects that many of the loans — given the low seasoning on the pool — have insurance coverage, “which will help mitigate losses if vehicles were damaged,” according to the report.
The CPS portfolio ticked up 2.4% year over year to $2.3 billion as of third quarter of 2017. Total delinquencies reached 10.27% of the lender’s portfolio, up from 10.05% at the same time the year prior. Management has previously cited the regulatory environment as the major factor affecting delinquencies, according to the report.
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