KBRA: Non-prime ABS pools contain contracts with modifications at volume levels as high as 21%


Kroll Bond Rating Agency is seeing some finance companies — especially in non-prime — holding securitized pools of auto paper with contract modification levels as high as 21%.

The noteworthy trends came via KBRA’s May auto loan indices when analysts examined the asset-backed securities market. KBRA indicated May remittance reports showed improving securitized auto loan credit performance during the April collection period, despite the unemployment rate rising to a “previously unimaginable” 14.7% during the month.

Analysts determined early-stage delinquencies (30 to 59 days past due) fell 30 basis points month-over-month and 27 basis points year-over-year to 0.80% in their prime index, while the percentage of non-prime contract holder in the early stages of delinquency fell to 6.97%, down 108 basis points month-over-moth and 140 basis points year-over-year.

KBRA then shared that later stage delinquencies (more than 60 days past due) also decreased month-over-month in both indices, but the declines were more modest.

“Enhanced unemployment benefits and federal stimulus checks likely played some part in lowering delinquency rates in April, as we believe most securitized auto loan borrowers were eligible for at least some level of stimulus,” analysts said in the latest report.

“However, we think the large percentage of borrowers receiving payment relief during the month, in the form of loan extensions, was the main driver,” they continued.

KBRA elaborated about that assessment by uncovering information from those ABS shelves that report asset-level disclosures.

Analysts discovered the percentage of consumers with an actively modified contract ranged from 2.0% to 12.1% for securitized prime auto pools and 7.1% to 21.3% for non-prime pools at the end of April. As KBRA put it, that’s “up significantly from prior months.”

Those efforts to help consumers further showed when KBRA pointed out its analysis of May’s asset-level disclosures also showed credit metrics improving during the April collection period.

The percentage of prime and non-prime contract holders who went from 30 days delinquent to current rose 903 basis points to 47.4% and 1,167 basis points to 40.8%, respectively, versus the previous month, according to KBRA.

Meanwhile, analysts added the percentage of prime contract holders who rolled from more than 60 days past due to charge-off fell 164 basis point to 13.7%, while the percentage of nonprime contract holders moving from 60-plus days delinquent to charge-off tumbled 343 basis points to 20.0%.

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