The American Heritage Federal Credit Union is raising capital by securitizing $251.8 million in revenue from a pool of auto loans extended to its members.
Known as AHART 2025-1, the American Heritage Auto Receivables Issuer Trust will issue notes through seven tranches of class A, B, C and D, according to Moody's Rating.
While AHART 2025-1 is only the credit union's second securitization, the institution has a long history in originating and servicing auto loans, which helps boost the notes' credit outlook.
Other credit positives include hard credit enhancement of 10.70% on all four tranches of the class a notes, Moody's said. Classes B, C and D have enhancement levels of 7.44%, 3.63% and 1.25%, respectively. This coverage stems from a combination of overcollateralization, a non-declining investor reserve account representing 0.50% of the note balances, and subordination.
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American Heritage, however, does not have a long securitization history or a large platform, with only $5.2 billion in total assets as of June 30, 2025, Moody's said. Yet the rating agency added that American Heritage is a federally-chartered and regulated credit union, an important mitigating factor.
The underlying auto loans are of weaker credit quality of the previous pool Moody's rated, the company said. On a weighted average basis (WA) the pool had a FICO score of 753, compared to a FICO score of 763 on the previous transaction. The loan-to-value (LTV) ratio for the AHART 2025-1 is 98.5%, up from 96.4% seen on the previous deal, Moody's said.
That is not AHART 2025-1's only credit drawback. The National Credit Union Administration is Heritage Federals regulator and insurer of deposits. If the agency had to step in as a conservator, or function as Heritage Federal's liquidating agent, the NCUA could repudiate contracts or recharacterize receivables in the securitization, Moody's said.
But that might not apply to the securitized assets, Moody's explained. The NCUA's safe harbor is non-exclusive, the rating agency explained. American Heritage structured the transaction to limit NCUA's reach over the assets and the transaction documents pledged to the securitization, the company said.
The assets' legal isolation means that the NCUA exercising its powers in a way that would reduce payments to the notes is remote.
Moody's assigns P1 to the A1 notes; Aaa to the A2 through class B notes; and Aa3 and Ba2 to classes C and D, respectively.
