ABS analysts at Citigroup Global Markets are reclassifying all 2004 and later vintage deals from Paramus, N.J.-based auto lender Long Beach Acceptance Corp. into the bank's Near Prime index. Those vintages had previously resided in Citigroup's subprime index, but, Long Beach has "significantly elevated the credit quality of its underwriting profile," according to Citigroup. Analysts now expect that elevation in underwriting profile will result in much improved losses, consistent with other near-prime lenders.
Since 2003 there have been a number of different changes to Long Beach's underwriting standards that have made its later vintages ripe for inclusion in the near prime index. At that time, Long Beach began to target higher-income borrowers with better FICO scores and originating more loans to homeowners. The average annual income for a typical customer in 2004 was $72,287 versus the 1999 average of $44,411, and the percentage of borrowers who are homeowners has almost tripled to 60%, from 22%, in that period.