Credit Losses Rise, Yet ‘Returning to Normal,’ S&P Says

Performance for both the prime and subprime sectors exhibited higher losses and delinquencies, and lower recoveries in the past year, according to a report released last week by S&P Global Ratings. The weakening in the prime sector, however, is just a return to normal levels, Amy Martin, senior director for structured finance at S&P, told AFN.

“Weighted average Ficos have declined a bit, LTVs have increased as well, and we’re seeing longer term loans,” she said. “But we think this is just part of normalizing credit trends.”

The subprime net loss rate was up to 5.36% for May, from 4.06% at the same time a year prior. Through May, auto ABS volume totaled $29 billion, down from $32 billion last year, according to Martin.

S&P is predicting yearend total ABS volume to hit $75 billion, but is prepared to adjust that number, she said. “That $75 billion was based on auto sales increasing about 3% this year, to 18 million units,” Martin said. “And we’re not as confident at this point that we’re going to hit the 18 million units for this year.”