Flagship Continues to Reduce Loan Terms, Latest ABS Shows

Flagship Credit Acceptance continues to reduce loan terms, according to Kroll Bond Ratings Agency’s latest ABS presale report.

Flagship began originating 75-month loans and 78-month loans in 2013. However, starting in mid-year 2016, Flagship started to reduce the percentage of its loan terms greater than 72 months to just under 2% of total originations, from approximately 5% in prior years, according to the presale. As of July 30, Flagship only has 1.8% of these longer term loans, compared with 1.5% in the lender’s previous transaction.

Flagship’s latest securitization — Flagship Credit Auto Trust 2017-3 — is a $185.2 billion transaction backed by subprime auto loan receivables. The weighted average Fico score is 597, up from 595 in FCAT 2017-2, according to the report. This transaction includes loans originated from both the Flagship Credit Acceptance and CarFinance Capital LLC branded origination channels, according to the report.

Amid heightened regulatory scrutiny where Department of Justice subpoenaed several subprime issuers — including Flagship and subsidiary CarFinance Capital LLC — regarding past originations and securitizations, Flagship is maintaining a “cautious approach” to automated approvals with approximately 2% of the applications that were not auto-declined being auto-approved, the report said.

Separately, starting in May, Flagship began using direct refinance scorecard 2.0 for the direct lending program that is originated through CarFinance.com. Flagship is also investing in an automated approval system, which the lender has tested since the beginning of the year, according to the report.

At midyear, Chadds Ford, Pa.-based Flagship and CarFinance had 828 employees, and a managed portfolio of approximately $3 billion; it originated approximately $398 million in the first half of 2017, down from $868.4 million over the same period in 2016.

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