Losses on Track to Improve in Santander’s Latest Securitization

Santander Consumer USA‘s first asset-backed securitization of the year is on track for lower losses relative to prior pools, despite higher loan-to-value ratios and a smaller percentage of new vehicles in the pool, according to Moody’s Investors Service.

Moody’s assigned a 24% cumulative net loss expectation to the $1.2 billion transaction, which is slated to close Jan. 23. By comparison, Santander’s last securitization of 2018 had a 25% cumulative net loss expectation.

The lower loss expectations are driven by stronger obligor credit quality, Moddy’s said. The weighted average Fico of loans in the pool was 584, compared with 577 in the lender’s previos securitization. Seasoning for loans in the transaction was four months, compared with two months in Santander’s previous deal.

Meanwhile, the average LTV for loans in the securitization pool was 110%, up from 108% in the October securitization. The new-used ratio was 39%-61%, compared with 42%-58% previously.

Santander issued approximately $7.2 billion over five deals in 2018, while its auto loan portfolio totaled $26 billion as of September 30, 2018, according to Moody’s.

A portion of the collateral pool consists of loans originated by Santander’s Chrysler Capital assets, which Moody’s highlights as a risk factor due to Fiat Chrysler Auto’s plans to form its own captive finance arm. Moody’s says if captive plans follow through Santander’s ABS deal would be, “moderately negatively affected by this development,” the presale report notes.