Gateway One Lending & Finance has scaled back its securitization program, as it looks to bolster loan quality and secure more predictable profits, President Todd Pierson told Auto Finance News.
“[The secondary] market has changed considerably,” Pierson said. “It’s been somewhat unpredictable for Gateway and [parent company] TCF Bank from an earnings standpoint, and we’ve really shifted to an originate-and-hold strategy. It has really helped us have a more predictable profit stream. We’ll ultimately retain much more net income off those loans we’ve originated.”
In all, TCF issued four securitizations since its first transaction in 2014. In May, Moody’s Investors Service downgraded TCF’s 2016 securitization, plus one of two 2015 issuances. The bank’s securitization curtailment is in line with a move to reduce originations 30% to 40% going forward.
In 2016, TCF originated $3.5 billion of loans, according to Big Wheels Auto Finance 2017.
Initially, the lender predicted it would pull back across all credit tiers. More immediately, though, the company has decided to make some “slight” reductions in the near-prime tier this year, Pierson said.
Gateway One will reassess its approach in 2018, but Pierson hopes the mix of credit quality will remain relatively unchanged in the long run. “Gateway is definitely focusing on quality profitability and deepening our relationships with our dealers,” he said.
