cheka.
25th March 2017, 03:57 PM
all of those loans to unemployed unemployables are coming home to roost. might get some decent prices on used car deals over next year or two..
http://www.marketwatch.com/story/auto-loan-quality-to-deteriorate-further-forcing-tighter-underwriting-fitch-2017-03-22
Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday.
“Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency.
Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said.
According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.
“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report.
Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category.
“The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano.
Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.
One measure, NADA’s Used-Vehicle Price Index, tracking wholesale prices of used vehicles up to eight years old, declined over 6% in 2016 and was down 8% year over year in February 2017, marking the eighth consecutive monthly decline
http://www.marketwatch.com/story/auto-loan-quality-to-deteriorate-further-forcing-tighter-underwriting-fitch-2017-03-22
Auto loan and lease credit performance will continue to deteriorate in 2017, led by the vulnerable subprime sector, Fitch Ratings said in a report released Wednesday.
“Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at the credit-ratings agency.
Banks are starting to lose market share to captive auto finance companies and credit unions as they begin to tighten underwriting standards in response to deteriorating asset quality, Fitch said.
According to the Federal Reserve’s January 2017 senior loan officer survey, 11.6% of respondents (net of those who eased) reported tightening standards, compared with the five-year average of 6.1%.
“This trend is consistent with comments made by several banks on earnings conference calls over the past couple of quarters,” Fitch said in the report.
Fitch considers continued tightening by auto lenders as a credit-positive but it’s also paying attention to market nuances. The tightening, to date, primarily relates to pricing and loan-to-value (how much is still owed on the car compared to its resale value), but average loan terms continue to extend into the 72- to 84-month category.
“The tightening of underwriting standards is likely a response to expected deterioration in used vehicle prices and the weaker credit performance experienced in the subprime segment,” added Taiano.
Used-car price declines have accelerated more recently, which will likely pressure recovery values on defaulted loans and lease residuals, the analysts said.
One measure, NADA’s Used-Vehicle Price Index, tracking wholesale prices of used vehicles up to eight years old, declined over 6% in 2016 and was down 8% year over year in February 2017, marking the eighth consecutive monthly decline