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zerohedge.com / by Tyler Durden / 03/22/2016 19:33 -0400
On Saturday, we highlighted a rather disturbing statistic.
60+ day delinquencies for subprime auto ABS have now risen above crisis levels to 5.16% – levels we haven’t seen since 1996.
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That won’t surprise regular readers. The writing has been on the wall for quite a while. More auto loan originations are going to borrowers with shoddy credit and loan terms are looking more and more stretched by the quarter. Just ask the NY Fed. Or Experian, where even permabull Melinda Zabritski will tell you that underwriting standards are getting looser (although she likely won’t say that’s a bad thing).
While Citi and others are quick to point out that the originate to sell model isn’t prevalent in the auto loan industry, the inability for lenders to securitize subprime loans may well put the brakes on US auto sales. After all, the pool of creditworthy borrowers is finite. That means that at a certain point, incremental sales must be engineered by making ineligible borrowers eligible by resorting to looser underwriting. But that only works if you can offload that credit risk. No lender wants to be sitting on a book full of used car loans to deep subprime borrowers with sub-600 FICOs, and so, if demand for subprime auto ABS dries up, so too will credit to the subset of borrowers who are driving (no pun intended) incremental sales growth.
The post This Could Be A Problem: Losses On “Deep” Subprime Auto Double Industry Average appeared first on Silver For The People.
Thanks to BrotherJohnF
