GM Financial disclosed in in a Securities and Exchange Commission filing last week that some “state attorneys general and other governmental offices” have requested documents from the lender regarding its subprime origination and securitization practices.

In July, the auto lender received a subpoena from the U.S. Department of Justice (DOJ) over similar issues. The subpoena was part of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

FIRREA gives the government broad authority to bring civil claims and has less stringent requirements to establish liability than commercial fraud statutes. Justice has used it to hold banks accountable for questionable mortgages that were securitized in the run-up to the financial crisis. Santander Consumer was also targeted by the DOJinvestigation of subprime underwriting and securitization.  

Barclays analysts stated in a report on Friday that it remains unclear what specific breaches are being alleged in the DOJ investigation. “Similarly, it is not clear at this time what the attorneys general are targeting and what the implications are for GM Financial,” the report states.

Spreads on subprime auto loan securitizations have already widened in the wake of the DOJ investigation. For example, the ‘BBB’ rated securities in Westlake’s latest deal (WLAKE 2014-3), which was issued in early October, priced 30 basis points wider than the corresponding ‘BBB’ class in its prior deal issued in May 2014 (190 basis points versus 160 basis points).

Similarly, the ‘BB-’ rated tranche in Flagship’s latest transaction (FCAT 2014-2) priced 40bp wider than the corresponding class in its prior deal (475 basis points versus 435 basis points).





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