Multiple subprime auto securitizers are coming to the market with lower average Fico scores, longer terms, and higher loan-to-value ratios than their previous issuances. Yet, these deals are being rewarded with higher ratings.
Joseph Cioffi, a partner at Davis & Gilbert LLP, has identified a fair amount of risk in this pattern and joined the Center for Auto Finance Excellence’s podcast, The Roadmap, for a discussion of auto ABS trends.
The short answer to identifying this trend is that lenders are adding a lot of protections to the securitization such as over-collateralization. But, at some point down the line that could reach a tipping point, he said.