Sunday, October 25, 2020

Tag: Subprime Auto Loans Blow Up

Subprime Auto Loans Blow Up, Get Very Messy

by Wolf Richter, Wolf Street:

With 30 Million Unemployed, Even Prime Loans Will Get Messy.

“Because consumer debt servicing statements are typically furnished to credit bureaus only once during every statement period, our snapshot of consumer credit reports as of March 31, 2020 is, in effect, largely a pre‑COVID‑19 view of the consumer balance sheet,” the New York Fed said today when it released its Report on Household Debt and Credit for Q1. So the credit-upheaval caused by the biggest and most sudden unemployment crisis in our lifetime is not yet included in the New York Fed’s delinquency data. But even in the pre-Virus Good Times, auto loans already exploded.

Subprime Auto Loans Blow Up, 60-Day Delinquencies Shoot Past Financial Crisis Peak

by Wolf Richter, Wolf Street:

Santander Consumer USA is on the forefront of souring subprime-auto-loan backed securities.

Santander Consumer USA, one of the largest subprime auto lenders and the largest securitizer of subprime auto loans, is not alone. But it’s on the forefront. It had $26.3 billion of subprime auto loans as of June 30 that it either owned and carried on its books or that it had packaged into subprime-auto-loan backed securities and sold to investors; in terms of the loans that it collects payments on, 14.5% of the borrowers were delinquent, according to S&P Global Ratings, cited by Bloomberg.

Subprime Auto Loans Blow Up, Delinquencies at 2009 Level, Biggest 12-Month Surge Since 2010

by Wolf Richter, Wolf Street:

But these are the good times. Automakers are not amused.

The auto industry depends on subprime-rated customers that make up over 21% of total loan originations. Without these customers, the wheels would come off the industry. And tightening up lending standards to reduce risks would cause serious damage to the undercarriage. Subprime lending is very profitable – until the loans blow up – because interest rates can be high. But those subprime auto loans are blowing up at rates not seen since the worst days of the Financial Crisis – and these are the good times!