Average Fico Drops in Nissan's Latest ABS Issuance | Auto Finance News | Auto Finance News

Average Fico Drops in Nissan’s Latest ABS Issuance

The weighted average Fico score in Nissan Motor Acceptance Corp.’s latest securitization dropped 3 points to 772 — as compared to the captive’s previous transaction — yet still ranks among the highest credit quality of issuances that Moody’s Investors Service has rated, according to the presale report released last week.

“Nissan’s Fico score is currently the highest among its captive peers,” Nicky Dang, vice president of senior credit officer at Moody’s Investors Services, told Auto Finance News. “We have been witnessing this trend since two or three years ago.”

The Nissan Automobile Receivables 2017-B Owner Trust is a $1.5 billion transaction backed by prime receivables of cars, crossover vehicles, sports utility vehicles, and light-duty trucks. Historically, Nissan has excluded its lower credit tier segments and focused on higher credit tier obligors for the ABS pools, according to Moody’s.

Also of note, the average seasoning of the 2017-B trust is 17 months — higher than those of its peers, and higher than Nissan’s last seven ABS transactions, according to the report. The average seasoning in Nissan’s 2017-A issuance was 12 months.

In general, the higher the average seasoning of the loans in the pool at the time of issuance, the more “front-loaded” are its losses, Dang said. While a longer seasoning indicates a “relatively safer” and more positive sign for investors, there are also other factors within the portfolio to be taken into account to determine if the issuance is a safe investment, Dang said. For example, originations, Fico score, loan terms, etc.

Like many of its peer’s auto securitizations, Nissan’s 2017-B issuance shows extended loan terms. “Over 60% of the collateral pool is composed of loans with an original term greater than 60 months,” according to the report. “This exposure is higher than that of recent NAROT transactions, which ranged from 50% to 57%.” By comparison, 62% of Hyundai Capital America’s latest transaction has an original term of 60 months or more, and 15.6% of  loans in Santander Consumer USA’s Drive platform securitization had original term loans of 73 to 75 months.

Also in comparison to its peer’s transactions, Nissan’s 2017-B trust has the lowest APR — 1.6% — as compared to Toyota Motor Credit Corp.’s 2.1% and Hyundai Capital America’s 3.2%.

Additionally, declining used-car prices may result in “a lower recovery rate and higher loss severity on defaulted loans and consequently a higher net loss,” Moody’s said in the presale report. The cumulative net loss expectation for the pool is 0.9% — higher than that of Nissan’s previous transaction, partly due to the “deteriorating environment for auto lending.”

1 - Reader Likes This Post