News Round-up

Auto ABS loss expectations lowered




Credit performance has remained strong across all types of US auto loan ABS since mid-2009, says Moody's in a new quarterly sector summary. The strong performance is driven by the improvement of consumer credit and the exceptionally strong used vehicle market.

"Delinquencies remain at historical lows and excess spread, the first level of credit protection against losses, has on average been sufficient to cover losses," says Sanjay Wahi, a Moody's avp and analyst.

Across all subsectors, transactions issued in 2009 and 2010 are performing significantly stronger than Moody's expectations at the time that they were rated. "As compared to those of prior years, the 2009 and 2010 transactions also benefit from stronger underlying credit, with borrowers having higher average FICO scores, and loan terms with short maturities," adds Wahi.

As of August 2011, Moody's has lowered its loss expectations on average by 20% to 50% from original expectations at the time the ratings were issued, leading to upgrades or reviews for upgrade of many securities. The agency has also lowered its loss expectations for auto loan transactions issued prior to 2009.

Moody's now expects these vintages to perform on average 1.5 to two times weaker than original expectations, down from earlier estimates in 2009 of 1.5 to three times. As a result, several securities from these transactions have also been upgraded.

Prime and subprime pools on average fall towards the low- and mid-end of the range of Moody's current loss expectations, while near-prime pools - which suffer from concentrations in some economically weaker US states - on average fall toward the high-end.

The 2011 vintage of auto loan securitisations are also performing strongly, says Moody's, and similarly to their 2010 counterparts - although they are marginally weaker in terms of borrower credit quality and lending terms. As these transactions season, the agency will update its loss expectations as needed.

26/08/2011 10:45:41



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