Consumer lending

Deals, trends and research in structured finance and asset-backed securities for the week of Feb. 26-March 4

In the midst of the pandemic recession, banks have benefited from government stimulus payments to consumers, low interest rates and constraints on the supply of new vehicles. But intensifying competition and real concerns about borrowers’ ability to pay loans that went into forbearance could soon threaten profits and credit quality.

DBRS Morningstar and S&P Global Ratings each have lower projected net losses for the $1.1 billion Westlake Automobile Receivables Trust 2021-1 transaction, in comparison to the subprime auto lender’s prior $1.4 billion securitization that priced in October 2020.

Rohit Chopra, President Biden’s nominee to lead the Consumer Financial Protection Bureau, has not minced words in calling out private companies for wrongdoing. He could get a grilling from Banking Committee Republicans and some opposition on the Senate floor.

As the Consumer Financial Protection Bureau slowed its pursuit of bad actors, state attorneys general vowed to pick up the slack. Here’s why they fell short — and why they are poised to get aggressive again.

Servicers could be dealing with approximately 1.8 million distressed properties when the latest forbearance extension ends in June, Black Knight said.

The extension rates were the highest since the peak of lender deferrals granted in the wake of the COVID-19 outbreak.

Last month, prominent investor Steve Eisman pegged Credit Acceptance Corp. as his new big short, based on a belief the subprime auto lender and its industry may come under closer CFPB scrutiny under the new administration. Analysts are taking note, as well.

Acting Director Dave Uejio said Tuesday that the Consumer Financial Protection Bureau will push back implementation of the qualified mortgage rule and may amend or revoke other Trump-era rules that have yet to take effect.

Early-stage delinquencies were up slightly in both prime and subprime auto ABS pools, according to the agency's report for January.

While the Mortgage Bankers Association hailed the move, some experts say it could negatively impact housing inventory.

Opportunity Financial, which offers consumer installment loans in partnership with banks, is merging with FG New America Acquisition Corp., a special-purpose acquisition corporation. The deal is expected to close in the second quarter.

Gains in consumer financial stability helped to decrease the rates of distressed home loans, but job creation is needed to make recovery sustainable, a CoreLogic report found.

The biggest U.S. banks reduced the portion of their collective balance sheets they’re dedicating to loans to a new low, extending a trend that’s seen the largest lenders put less and less of their firepower behind everyday borrowers.

Acting Director Dave Uejio wrote in a blog post that the Consumer Financial Protection Bureau needs more time to consider rules that were finalized under the Trump administration but have not yet gone into effect.

The proposed securitization launches the same week the Federal Reserve lifted a three-year-old enforcement action against the auto lender over its prior risk compliance oversight policies.

However, the share of new impairments increased, likely as a result of the high concentration of these loans given to self-employed borrowers.

The CARES Act-related forbearances could be “lulling us into a false sense of security” as 12-month expirations approach, according to Black Knight.

Like other card issuers, the Stamford, Conn., company expects current trends — soft loan demand but strong credit quality — to reverse later this year as the economy emerges from the pandemic-induced recession.

Dave Uejio, acting director of the Consumer Financial Protection Bureau, promised to protect veterans from predatory loans and to crack down on companies that improperly garnish stimulus checks or mistreat struggling borrowers.