OneMain’s Latest Direct Auto ABS Increases Credit Quality

OneMain Financial Holding LLC’s second direct auto loan securitization in 2017 has an average Fico score of 642 — 32 points higher than the first ABS of 2017 and 33 points higher than its 2016 ABS.

The most significant contributor to the Fico increase in the $500 million deal is a drop in the percentage of 549 & lower Ficos, according to a Kroll Bond Rating Agency presale report. In the current pool, 2.7% of loans had a Fico score of 549 and lower, compared to 16.2% in the company’s earlier issuance this year. There was also a notable increase in the 650 – 699 range. The pool consists of 30% of 650-699 Ficos, compared to 19% in the earlier issuance.

Additionally, the primarily subprime pool is made up almost entirely of used vehicles and has a weighted average original term of 55 months.

The weighted average original term of 55 months is shorter than that of subprime peers, according to a Moody’s presale report, but Kroll Bond Rating Agency’s report notes that the company allows renewals of direct auto loans to its existing borrowers. A renewal
may take place if a borrower requests an increase in loan size and the company undergoes a full underwriting process. Also, the weighted average LTV in this transaction is 126%, higher than many subprime peers, according to Moody’s.

OneMain has issued nine consumer loan term securitizations since 2014 through a network of over 1,600 branches, however, its entry into direct loan securitizations started this year. OneMain Financial grew its auto portfolio in the 3Q driven by an increased focus on direct lending, the company said during its recent earnings call.

Separately, the auto finance company has been actively soliciting takeover bids, Auto Finance News has previously reported.