KBRA leverages latest ABS data to estimate payment frequency


Kroll Bond Rating Agency (KBRA) used the research for its latest auto-finance securitization indices to gauge the volume of both prime and non-prime retail installment contract holders maintaining their payments, at least for the March recording period.

At least for that juncture, KBRA determined April’s remittance reports showed that securitized auto financing continued to display stable credit performance during the March collection period. Analysts indicated annualized net losses and delinquency rates were mostly flat month-over-month in both their prime and non-prime indices.

“The solid performance was likely driven by the timing of borrower loan payments, as well as payment relief programs provided by servicers in the form of loan extensions,” KBRA said in its latest update released on Monday.

“In past reports, we have typically focused on the month-over-month and year-over-year change in annualized net loss rates and 60-day delinquencies,” analysts continued. “However, given that both metrics have a lag of more than one month, we have also included 30- to 59-day delinquency rates to provide a better gauge for how the coronavirus (COVID-19) pandemic affected borrowers in March.”

Based on asset-level disclosures, which are available for securitizations published in the public ABS market, KBRA estimated that roughly 50% of prime contract holders and 40% of non-prime contract holders made their March payment during the first half of March before initial jobless claims spiked.

Analysts also noticed prime and non-prime contract extensions — which KBRA are analogous to contract forbearance — rose sharply during the month, climbing to 3.6% of prime securitized pools and 6.7% of non-prime pools.

“We expect to see a spike in delinquency rates and/or a further rise in extension rates in both our prime and non-prime indices in May (April collections), as it will reflect the first full month where borrowers are faced with pandemic-related stresses,” analysts said.

KBRA also mentioned its review of April’s Reg ABS II asset-level disclosures showed credit metrics mostly weakened during the March collection period.

Analysts found that the percentage of prime and non-prime contract holders who went from 60-days delinquent to current fell 179 basis points to 23.3% and 13 basis points to 16.1%, respectively, versus the previous month.

Meanwhile, KBRA pointed out the percentage of prime contract holders who rolled from 60 days past due to charge-off rose 125 basis points to 15.3%, while the percentage of non-prime contract holders moving from 60-day delinquency to charge-off rose 120 basis points to 23.5%.

Analysts went on to note another notable sign of weaker credit performance — the percentage of prime and non-prime contract holders who rolled from 30-50 days to 60-89 days past due. KBRA said those metrics rose 183 basis points and 445 basis points month-over-month in March.

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