Consumer lending

By helping borrowers now, banks hope customers can quickly catch up on payments once the coronavirus pandemic ends. If they can’t, interest income will remain low and charge-offs could pile up if the crisis drags on.

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

Fitch assumes a significant spike in defaults over the next few months, as well as declining new issuance volume during the second and third quarters of 2020, fewer maturing loans and fewer resolutions by special servicers.

Closed showrooms, temporary bans on repossessions and a sudden spike in unemployment have dimmed the prospects of a sector that has boomed since the last recession.

ABS participants saw markets freeze and were bracing for worse when federal aid provide a short-term respite. The question now: How much trust can anyone put in the medium-term and beyond?

If Capitol Hill plans another round of stimulus, Democrats could have more leverage to demand steps such as suspending overdraft fees or placing a temporary cap on consumer lending rates.

Federal Housing Finance Agency Director Mark Calabria said a virus-induced financial crisis might give rise to more delinquencies and foreclosures than the 2007 subprime mortgage meltdown.

The agency has relaxed some reporting requirements and joined other regulators in encouraging banks to help borrowers, but pressure is building on the bureau to do more to aid consumers suffering financial hardship.

The Federal Reserve committed Monday to conducting more asset purchases of Treasury securities and mortgage-backed securities and announced $300 billion in new financing for credit facilities.

Mark Calabria said Fannie Mae and Freddie Mac are currently equipped to handle elevated delinquencies, but they might need congressional or Federal Reserve help if fallout from the coronavirus persists.