Subprime lending

According to ratings agency presale reports, Flagship will sell $303 million in bonds from a $314.8 million of loan originations by Flagship as well as its CarFinance.com subsidiary.

Prestige's new $377M securitization has a collateral pool in which over 44% of the loans are from borrowers with recent Chapter 7/13 discharges.

Deals, trends and research in structured finance and asset-backed securities for the week of Sept. 25-Oct. 1

Shares of the company surged 31% in New York on Tuesday after it projected record revenue and profit margins. The stock has rallied almost 150% this year as Americans have turned to buying household essentials, entertainment and, increasingly, used cars online.

Both Moody's and DBRS Morningstar project elevated credit-loss levels for the auto lender, compared to prior deals, due to COVID-19 uncertainties

The share of 78-month loans is at 14.9%, compared to approximately 10% in World Omni's previous issuance from its subprime/nonprime shelf.

Credit Acceptance Corp.'s second securitization of 2020 has a higher loss rate than the first deal due to COVID-19 worries, as well as rising loss levels in the lender's recent-vintage securitizations.

A subprime-related settlement between the government and Deutsche Bank provided meaningful benefits to some U.S. consumers in need, according to a new report. But the author acknowledged that those gains could prove illusory for some consumers given the coronavirus crisis.

More than $2.5 billion in new subprime auto securitization deals hit the market this week, including a portfolio of indirect loans pooled by first-time issuer First Help Financial.

Subprime auto ABS market participants do not see its outlook worsening significantly as a result of the pandemic, but most anticipate losses.

Westlake Automobile Receivables Trust 2020-2 pools a portfolio of loans for mostly high-mileage used-vehicles financed by the privately held Westlake through independent and franchise dealers. The deal includes a $370.9 million triple-A tranche (as preliminarily rated by S&P Global Ratings and DBRS Morningstar) that benefits from 42.75% initial credit enhancement.

Potential COVID-19 stresses include a rising tide of unemployed borrowers missing payments and seeking extensions, as well as falling used-car values.

Global Lending Services, a subprime auto lender that has ramped down its expansion plans for 2020 amid the coronavirus outbreak, is proceeding with its second auto-loan securitization of the year.

Exeter, DriveTime and CPS last week joined a small club of subprime auto lenders sponsoring ABS deals since their TALF eligibility was announced.

The lender will pay $65 million in restitution and forgive nearly $500 million in auto debt to settle charges that it steered subprime borrowers into risky loans.

The Flagship Credit Auto Trust 2020-2 transaction is only the second subprime auto-loan ABS transaction in the last two months, following the pricing last week of an American Credit Acceptance-sponsored $209.3 million bond offering.

Over 236,000 prime and subprime vehicle-loan borrowers received payment deferrals of between 30 and 120 days during the early economic turmoil of the coronavirus pandemic, according to the ratings agency.

Falling used-car values, loan forbearance programs and economic uncertainty are weighing on the lower-end of the subprime auto finance sector.

Credit Acceptance Corp., the lender to car buyers with subprime credit scores, warned it's seeing a sharp drop-off in payments as people shift their financial priorities to get through the coronavirus pandemic.

The two companies are placing two deep-subprime securitizations of consumer loan and lease contracts issued prior to the coronavirus impact on originations.