Despite Stronger May, ABS Credit Performance Likely to ‘Deteriorate,’ Rating Agency Says
After 16 straight quarters of improvement, credit quality in prime auto loan securitizations will start to “deteriorate,” according to a newly released report from Kroll Bond Rating Agency.
While May servicer reports showed improving credit performance across prime and nonprime auto securitizations, performance is predicted to weaken through the summer months. “With the effects of the tax season now in the rearview mirror, we expect credit performance to slowly deteriorate over the coming months,” KBRA noted.
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Annualized net losses in KBRA’s Prime Auto Loan Index fell 12 basis points year over year to 0.46%, while loans at least 60-days delinquent fell 5 basis points to 0.39%. The report noted that the month of May marked the 16th consecutive reporting period in which net losses and delinquency rates within the Prime Auto Loan Index fell year over year.
In the Nonprime Auto Loan Index, net losses and delinquency rates rose year over year, increasing 3 basis points to 6.46% and 16 basis points to 4.12%, respectively. On a month over month basis, though, annualized nonprime net losses fell 71 basis points, while 60-day delinquencies fell 9 basis points.
