Second largest Qtr ever closes out record year of ABS volume
New-issue ABS supply picked up in the final three months of last year, totaling just over $107 billion. This was the second-largest quarter by volume in both the history of the market and for 2002 full year (behind the $111 billion in Q202).
As had been the case throughout the prior quarter, real-estate ABS was the dominant asset class in 4Q02, according to Thomson Financial. Real estate ABS totaled $51.2 billion, accounting for 52.3% of the entire ABS primary market.
Interestingly, volume of real estate ABS was flat versus the third quarter, but increased by 40.9% versus the same period of 2001, when supply slowed in the wake of the terrorist attacks. The driving factor behind the increased supply throughout the second half of last year - aside from record setting refinance activity - was the suddenly hot whole loan market for subprime mortgages. Banks snatched up new originations to sell on a principal basis via self-led issuance vehicles.
With $22.5 billion of supply in the fourth quarter, auto loan ABS was also on par from the previous quarter (22.4 billion in 3Q02). Versus the same quarter the previous year, however, auto loan ABS supply increased by 34.7%.
There were two notable first-time issuers in 4Q02, one of which marketed the first auto loan ABS done on a principal basis for underwriter Bear Stearns. The Birmingham, Ala.-based Regions Bank deal totaled $800 million in prime auto paper. Bear's Whole Auto Loan Trust (WALT) priced $2.9 billion of prime collateral, which was purchased from DaimlerChrysler N.A., Ford Motor Credit and Volvo Finance.
Credit card supply increased on both a quarter-over-quarter and year-over-year basis. Coming in at $19.5 billion last quarter, credit card supply increased 43% from the previous quarter and 39.7% versus 4Q01. As a percentage of the entire ABS market, credit card supply consisted of 18.2%, versus just 15.1% of total supply the year before.
As expected, student loan ABS supply picked up throughout 2002, culminating in a $5.9 billion fourth quarter, up 41.7% from the same period the year before. Spurred by the sector's first-ever legitimate refinancing wave, benchmark issuer Sallie Mae priced four deals in the fourth quarter, including its first ever transaction backed entirely by consolidation loans.
Amid a sector meltdown that saw two of its most prolific issuers seek Chapter 11 bankruptcy protection, there was just one manufactured housing securitization in the fourth quarter. The only financially healthy MH lender, Vanderbilt Mortgage, sold $500 million of 2002-C paper in late November, just ahead of both Conseco Finance Inc. and Oakwood Homes Inc. declaring insolvency.