Subprime lending

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.

According to presale reports on Flagship’s $355 million auto-loan securitization, the subprime auto lender is removing the 2% collateral pool limit on loans over six years (72 months) that can be added during a three-month prefunding period for Flagship Auto Credit Trust 2020-1.

The Justice Department had issued subpoenas in 2014 and 2015 to GLS and other subprime lenders regarding underwriting criteria for lending as well as representations and warranties for loans being securitized, according to Kroll.

The older loans have boosted the $260M CPS 2020-A pool seasoning to nine months, compared to CPS’ standard vintage of loans under one month that usually collateralize CPS ABS platform issues.

Moody's and Kroll have lower loss expectations for the online platform's next $380M securitization.

The ratings agency's monthly auto loan ABS index tracker shows losses and 60-plus-day delinquencies decreased both month-over-month and year-over-year.

Santander Revolving Auto Loan Trust 2019-A is the debut deal on Santander’s revolving platform (or SREV, according to presale reports), and will have a five-year period in which the lender can add additional loans to the collateral

Lenders have bundled more than $18 billion worth of non-QM, private-label loans into bonds this year that they then sold to investors, a 44% increase from 2018 and the most for any year since the securities became common post-crisis.

The percentage of recent mortgage borrowers with subprime credit scores still resides in the single digits, but nearly doubled what is was in 2013, according to TransUnion.

Loss expectations are up slightly for the second retail auto lease securitization of the year for RAC King the parent company of the regional “buy here/pay here” used-car chain American Car Center.

According to ratings agency presale reports, the $398.7 million Flagship Credit Auto Trust 2019-4 includes a 23% share of collateral loans originated through the company’s growing dCarFinance.com direct financing channel.

A growing percentage of Santander Consumer USA Holdings Inc.’s subprime auto loans are turning out to be clunkers soon after the cars are driven off the lot.