Prime auto U.S. ABS delinquencies jumped 22% on a monthly basis in May, while net losses improved 17% in May over April clouding expectations for the coming summer months, according to Fitch Ratings. The improvement in net losses was mostly a result of seasonal patterns and losses remain near record high levels.
Prime 60+ days delinquencies rose to 0.72% in May, up from 0.59% in April.
The increase in delinquencies last month was noticeably higher than previous years during this period.
Delinquencies were 26% higher in May versus 2008 levels; they hit a record high of 0.87% in early 2009 but are back off of those levels.
Despite historically high loss rates, the ratings of senior classes of notes continue to perform within expectations, with minimal negative rating actions issued in 2009 to date.
Fitch also says the European auto ABS sector experienced an increased number of negative factors during Q109, including a rise in delinquencies and net losses.
The Fitch 60-180 Delinquency Index (Fitch DI) breached an historic peak in the first quarter, increasing to 1.5% (up 20 basis points compared with Q408). Since December 2007, the Fitch DI has increased by 50 basis points to 1.5% and is not expected to stabilise during the next quarter (Q209).
The Fitch Net Loss Index (Fitch NLI) increased to 0.5% during Q109 (up 40 basis points compared with Q408), but remained within historic levels.
The Fitch Excess Spread Index (Fitch ESI) was slightly lower during the first quarter of the year, and stood at 2.3% (down 20 basis points compared with Q408).
For details see: Tyre Tracks - Fitch European Auto ABS Index.
Technorati Tags: asset-backed-securities, auto-loans, automobiles, structured-finance
The rise in US credit card delinquencies may be peaking as the rate of unemployment growth slows, CreditSights says in a new report.
- While charge-offs have been accelerating, the rises in delinquencies in credit card ABS have been slowing in recent months. This slowdown may simply be a seasonal slowdown in delinquencies.
- However, the slowdown coincides with a deceleration in job losses, which have tended to be a leading indicator of charge offs. And so if this slowdown in unemployment growth is sustained it may signal that charge offs are close to peaking.
- The rises in delinquencies coincide with the most substantial falls in credit card debt outstanding as lenders reduce their exposure and households look to deleverage their balance sheets.
Although, the growth in delinquencies may be slowing and may in turn bring a peak in charge offs we do not believe that credit card ABS are necessarily out of the woods.
Technorati Tags: asset-backed-securities, credit card ABS, credit-cards
Rating performance for 2007 U.S. auto loan ABS has and will continue to hold up reasonably well in the face of rapidly rising delinquency and loss levels, according to Fitch Ratings.
Fitch projects cumulative net losses to reach and exceed levels not seen since 2001 due to the economic downturn and rise in unemployment. However, initial credit enhancement levels and the rapid de-leveraging of transaction structures among 2007 deals are serving as an effective shield against significant negative rating actions.
Through the first 16 months, losses on 2007 vintage prime ABS have reached 1.43%, significantly above the 1.00% realized through the same period on the 2001 securitization vintage. Fitch expects that losses on the 2007 vintage will continue to exceed those of the previous years observed and that CNLs will ultimately reach 3.0%−3.5%.
For details see Acceleration: Losses on 2007 Vintage Auto Loan ABS Pick Up Pace.
Technorati Tags: asset-backed-securities, auto loan ABS, structured-finance
Net global securitisation issuance slumped by 79 per cent from $2,138bn in 2007 to $441bn in 2008, according to IFSL’s Securitisation 2009 report.
Gross global securitisation issuance showed a drop of about a third from $3,817bn in 2007 to $2,777bn in 2008. However, the majority of securitisation issuance in 2008 was retained within the issuing banks for repo agreements in order to enhance liquidity and availability of credit.
Quarterly issuance continued to fall through 2008 from $149bn in Q1 to $60bn in Q4.
There is little indication of a recovery in the first quarter of 2009. The global market for securitisation has fallen away since the autumn of 2007, due to turbulence in credit markets, a lack of liquidity and a reduction in investors’ tolerance of risk.
Thomson Reuters estimates for Q1 2009 indicate that securitisation remains at a very low ebb: US issuance of $20bn was slightly up on the $10bn in the Q4 2008, but well below $80bn in each of the first two quarters of 2008 and down on issuance of around $500bn a quarter between mid-2005 and mid-2007.
Some revival of securitisation in the US may emerge if investors are attracted by the design of the TermAsset- Backed Securities Loan Facility (TALF). The TALF is a $200bn lending programme created by the Federal Reserve that will provide financing for USentities that purchase newly issued ABS, including credit cards, auto loans and possibly commercial mortgages. While the facility could be increased to $1,000bn it has got off to a slow start with only limited applications in the first two months, partly linked to investor concerns about restrictions linked to taking up the loans.
Technorati Tags: asset-backed-securities, mortgage-backed-securities, securitization, structured-finance, TALF
Moody’s reports that credit card charge-offs advanced decisively in February to 8.82%, representing an all-time high in the 20-year history of the Moody’s Credit Card Index.
The percentage of delinquent borrowers also rose to 6.14% – a 17-year high.
Additionally, the principal payment rate index, a measure of cardholders’ willingness and ability to repay their credit card debt, slipped sharply. While the yield index staged a rebound despite persistently low interest rate levels, the excess spread index, continued to narrow as the jump in charge-offs more than offset the improvement in yield.
Despite the marked deterioration in collateral performance, Moody’s has watch-listed relatively few of the card-backed notes from the industry’s largest credit card issuers. Moody’s says that’s due, in part, to the explicit support (e.g. additional credit enhancement) some issuers have provided to their related ABS programs. HSBC, Bank of America, GE, and Citibank have (or announced their intention to) come to the aid of their ABS transactions.
Full details are available here.
Technorati Tags: asset-backed-securities, charge-offs, credit card ABS, delinquencies, structured-finance
Traditional non-mortgage consumer assets continue to dominate U.S. asset backed commercial paper (ABCP) programs, according to an analysis by Fitch Ratings.
Combined credit card, auto, and student loan exposures made up approximately 53% of the holdings in Fitch rated multiseller conduits at year-end 2008.
While Fitch expects the performance of consumer related assets to continue to deteriorate through the recession, the impact on ABCP conduits is expected to be limited.
Conduits have historically financed senior positions of consumer related transactions. Over the past two years, many conduit transactions have been restructured with higher levels of protection in the form of credit enhancement or other means of support. Taken with the availability of programwide credit enhancement facilities, these actions will help to insulate ABCP investors from consumer asset related performance concerns, Fitch says.
The most recent data shows the growth in consumer assets has come as exposures to residential mortgage and collateralized debt obligations (CDO) have fallen from their highs from previous points in the prior two years. Combined residential mortgage and CDO exposure made up close to 5% of Fitch rated multiseller conduits at year-end 2008, down from over 16% two years prior.
U.S. ABCP outstandings have declined more than 7% from year-end 2007 to year-end 2008 from $780 billion down to $724.5 billion. Overall exposures to non-mortgage consumer assets grew significantly during the period.
Fitch analyzed ABCP collateral pool compositions including exposures to residential mortgages as well as CDO and financial guarantors, and any other related counterparties. The analysis also included a Monte Carlo simulation analysis of multiseller and securities-backed programs if applicable.
For details see: U.S. Multiseller ABCP Ratings Remain Insulated From Consumer Credit Concerns.
Technorati Tags: ABCP, asset-backed-securities, CDO, collateralized debt obligations, residential mortgage-backed securities, structured-finance
Moody’s says US auto sales are running below the level implied by economic conditions, a symptom of the panic caused by the financial crisis and the prospect of an automaker bankruptcy.
In its lastest monthly Auto Navigator report, Moody’s says economic factors “predict a sales pace of 11 million units during the first quarter, while actual sales are running between 9 and 9.5 million units.”
In addition to the considerable weights on vehicle sales from the alarming deterioration in the labor market, record-low confidence, rapidly eroding household wealth, deteriorating credit quality, which is closing access to credit to skittish lenders, there are unexplained factors that are contributing to the plunge in sales.
“They are indicative of the panic that has gripped the nation’s households in the face of the financial crisis, the possible bankruptcy of domestic automakers and concerns about the very future of the nation.”
Other highlights of the report:
- Despite its promise of significant savings, the proposed restructuring will leave Ford’s (NYSE: F) cash generation profile and credit quality highly challenged. We explain why an improvement on its Caa3 CFR is unlikely through 2010.
- We continue to believe that there is about a 70% probability that one or more of the Detroit Big 3 will file for Chapter 11 bankruptcy with government DIP financing. This would most impact securitizations with direct links to the manufacturer and vehicle values such as auto dealer floorplan and retail auto lease ABS.
- Sales trends so far in 2009 show new car sales stuck in the mud, with the luxury lines in deepest. All five rated dealers experienced some sort of negative rating action in 4Q 2008.
For details see: Moody’s Auto Navigator.
Technorati Tags: (F), asset-backed-securities, auto sales, Ford
Credit card charge-offs reached a record-high 7.74%, according to Moody’s.
Despite the level being essentially flat compared to a month ago, an increasing number of borrowers are falling behind on their credit card payments indicating that charge-off rates will almost certainly increase in the coming months.
“Additionally, the seasonal post-holiday rebound in payment rates did not materialize this January, leaving the payment rate index near a five-year low. The payment rate has been falling since early 2007. Yield and excess spread levels also showed softness during the month as the anticipated effects of recent issuer re-pricing initiatives have yet to materialize in trust performance.”
For details see: Moody’s: Credit Card Borrowers Under Continued Pressure In January.
Technorati Tags: asset-backed-securities, credit card ABS, credit card debt, structured-finance
Growing signs of trouble in the credit card debt sector are documented in Fitch ratings’ latest monthly Credit Card Movers & Shakers report. However, Fitch does not expect many negative ratings actions in the short term.
“Late payments on U.S. credit cards topped record levels and defaults rose sharply to just below all time highs last month as consumers struggled further amid the deteriorating economic environment.”
Fitch said the negative chargeoff results were offset by lower funding costs helping to maintain excess spread cushions for credit card ABS. In addition, monthly payment rates snapped back from the prior month’s four-year lows although they continue to exhibit slowing trends on year-earlier comparisons.
Consistent with previous indications, Fitch expects credit card ABS performance to worsen further given recent delinquency and bankruptcy trends and the rise in unemployment levels. Nevertheless, negative rating actions are expected to be limited in the near term.
Fitch anticipates chargeoffs will breach 8% in the coming months and approach 9% during second half-2009. Deterministic stress testing on Fitch rated trusts indicate existing ratings can withstand such scenarios with potential negative rating actions limited to subordinate classes. Additional information is available in Fitch’s Dec. 15, 2008 report ‘U.S. Credit Card ‘What If?’ Stress Scenario’, available at ‘www.fitchratings.com’.
Prime general purpose card results for the December collection period show Fitch’s Chargeoff Index rising 66 basis points (bps) to 7.50%, the highest level since the bankruptcy reform spike in late 2005 when chargeoff rates reached 7.53%. Current levels are now 40% higher than year earlier results.
Late stage delinquencies continued to rise as well with the Fitch’s 60+ day Index rising 47 bps to a record 3.75%. The previous high was 3.73% in February 1997. Although late stage delinquencies were elevated throughout 2008, they escalated rapidly in fourth quarter-2008 by 18% to current levels.
Technorati Tags: asset-backed-securities, credit card ABS, credit card debt, structured-finance
Research Recap’s most viewed posts, attracting thousands of visitors, reflect the credit crisis that spread from the subprime mortgage meltdown throughout the US financial system and into markets and economies worldwide.
All of the top 10 posts and 19 of the top 20 were related to the credit crisis, and it was not until number 26 that a more positive post made the list.
Interestingly, some posts from early in 2008 remained well-read throughout the year as readers tried to make sense of the deepening credit crisis, particularly primer posts like the Research Primer on Credit Default Swaps and the IMF analysis of the role of hedge funds in the subprime crisis.
Research Recap’s Most Read Posts of 2008 were:
1. Warning Signs Seen in Rising Credit Card Delinquencies
(CreditSights - Mar 27)
2. Lenders Slow to Address Florida Mortgage Defaults
(Barrons - Apr 21)
3. Role of Hedge Funds in Subprime Crisis Examined
(International Monetary Fund - December 2007)
4. US Mortgage Insurers’ Troubles May Worsen
(Fitch Ratings - Jul 17)
5. 2007 Worst-Ever Vintage for US Subprime, Alt-A RMBS
(Standard & Poor’s Ratings Service - May 23)
6. Research Primer: Credit Default Swaps
(Fitch Ratings - Jan 14)
7. Alt-A Borrowers Looking More Like Subprime than Prime
(Fitch Ratings -Jun 2)
8. Global Junk Bond Default Rate Doubled in First Five Months
(Moody’s Investors Service - Jun 10)
9. Subprime-Related Litigation on the Rise
(NERA Economic Consulting - Jul 15)
10. What Lies Behind Higher US Negative Equity, Default Rates
(Bank for International Settlements -Dec 9)
With the credit crisis far from over, we would expect it to be a prominent topic again this year. With a new administration in place in Washington, we also expect to see infrastructure and greentech emerge as hot topics.
Click here to see The Top Posts of 2007.
Technorati Tags: Alt-A, asset-backed-securities, corporate bonds, credit card ABS, credit-crisis, credit-default-swaps, credit-markets, delinquencies, Hedge-Funds, junk-bonds, litigation, mbs, mortgages, negative equity, structured-finance, subprime, top posts, Zeitgeist
