Repossession agencies are seeing a return to about 60%-70% of pre-pandemic volumes, but are preparing for a surge in volume in 30 to 45 days as loan assistance programs end and delinquency rates likely increase, Les McCook, executive director for the American Recovery Association, told Auto Finance News. Repo rates could increase by as much as 30% from the baseline rate, which is normally 2% of vehicle sales, due to the COVID-19 pandemic, McCook added.
Repossession management firm Resolvion, which works with more than 750 agents, is also seeing a return to about 65% of normal volume, seasonally adjusted, Executive Vice President Jose Mendiola told AFN.
“Government stimulus help, bank deferment programs and the lack of consumers falling into a default status coming out of these deferment programs, have all equaled less repossession activity than originally forecast at the onset of the pandemic,” Mendiola noted.
Lenders also typically prioritize holding onto auto loans. “[If] debtors are able to keep themselves relatively consistent with their payments and not fall into a 30-plus or 60-day [delinquency] category, then more than likely the lenders will work with them,” Mendiola said.
However, a growth in repossessions is likely in November as many programs that delayed loan payments and kept delinquencies low ended this month, McCook told AFN. The repossession market slowly began picking back up six to eight weeks ago, following a pandemic-induced three-month moratorium on involuntary repossessions, he added.
“[The repo market is] still not back at full strength, and when it does finally break open … my understanding is there’s going to be a very large volume. There’s a lot of pent-up demand,” McCook added. “It could be a severe bottleneck for a time.”
The repossession industry is planning for a near-term future that is hard to predict as talks continue for a potential second round of stimulus funds, Mendiola said. “It’s very difficult to predict what delinquencies are going to look like. We’re operating under the expectation that it could take as long as the summer of 2021 before repossession numbers return to pre-COVID seasonally adjusted levels,” he said.
President Donald Trump said today stimulus discussions are back on and that passage of a new stimulus bill could smooth the way for another round of $1,200 checks, although talks had been shut down Tuesday. If another round of stimulus checks were approved, eligible citizens would likely receive the money after the election, according to multiple reports.
Still, the concern that lower repossession volumes could shutter many repossession agencies has not come to fruition, Mendiola said. “The longer [the pandemic] goes without normalizing, the more potential there is for fallout, but we haven’t seen a mass exodus of repo agencies [from the market],” he noted.
Lenders and repossession agencies do, however, face the additional hurdle of having enough manpower to handle a potential uptick in volume, especially if employees must quarantine due to COVID, McCook added. “I don’t know how lenders are going to handle it. We’re facing issues like that all over the industry … things outside of our control and outside the norm are taking away from our ability to perform. … I don’t think anybody knows what’s going to happen.”