Nissan Motor Acceptance Corporation plans to issue a $833 million securitization of retail auto loans .
The deal is Nissan’s third retail auto loan securitization of 2013 and looks much like previous deals. However it will be the first deal to include loans with 73 to 75 month loan terms, according to a Fitch Ratings presale report.
Nissan has increasingly added longer term loans to their securitization pools. Fitch said that loans with terms greater than 60 month increased in Nissan’s latest deal to 49.03% and loans that fell in the 73 to 75 months made up 4.09% of the pool.
Historically, losses tend to rise as loan terms increase. However in an Oct. 13th report, Fitch notes that the longer term loans in current auto ABS pools are underwritten to borrowers that have higher credit scores, compared to those in the overall transaction pools, mitigating some risk posed by these increasing loan terms.
“At this level, we do not view the increased use of longer-term loans to be materially impactful,” said analysts in the report. “However, if underwriting continues to normalize and loan terms lengthen, future ABS pools with increased concentrations of longer-term collateral may drive loss expectations higher, resulting in higher base case loss proxies and ultimately necessitating higher levels of credit enhancement.”
Overall, there has been a 20% increase in longer-term loans in auto ABS transactions in 2013 since 2010. The use of extended-term loans in nonprime ABS transactions increased with loan pools containing approximately 80% longer-term loans in transactions issued in 2013, up from 67% in 2010. Similarly, in the prime sector these loans comprised 43% of pools securitized in 2013 from 36% in 2010.
Fitch has assigned the deal preliminary ratings. The class A-1 notes will be marketed to money market fund investors and is rated F1+’. The class A-2, A-3 and A-4 notes are rated AAA’.
The weighted average FICO for the pool backing the deal is 758 and new vehicle loans make up 96.36% of the pool. Merrill Lynch Pierce, Fenner & Smith is the lead underwriter on the deal.