Subprime lending

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.

Following four prior securitizations of prime auto-loan originations through its Carvana Auto Receivables Trust (CRVNA), the firm will sponsor its first pool of non-prime retail used auto loans underwritten via its e-commerce platform.

Veros Credit received an AA rating in its 2018-1 transaction, which featured lower loan-to-value ratios and average account balances in the pool.

Investors are reacting skeptically to the auto lender's deal to acquire CardWorks for $2.65 billion.