KBRA waiting for auto ABS deterioration after March improvements


Kroll Bond Rating Agency (KBRA) acknowledged its March prime and non-prime auto loan ABS indices don’t yet reflect the depths of how the automotive asset backed securities market might be impacted by the coronavirus pandemic. Auto securitizations showed improving credit metrics stemming from March servicer reports connected to the February collection period.

The annualized net losses and 60-day delinquency rates fell in both of KBRA’s prime and non-prime readings, but analysts are projecting significant changes for their next report.

“March servicer reports will be the last to reflect loan performance before the coronavirus (COVID-19) pandemic led to a widespread disruption of the U.S. economy,” KBRA said in its latest report. “All eyes will be on April servicer reports (reflecting the March collection period) to see how the shutdown of most nonessential U.S. businesses and the resulting sharp increase in employee layoffs and furloughs have impacted auto loan ABS credit performance.

“The passage of the $2 trillion federal stimulus package on March 27, which included expanded unemployment benefits and recovery rebate payments, as well as borrower tax refunds and servicer relief programs should help to soften the blow — but by how much remains to be seen,” the firm went on to say.

For now, analysts have their latest data to consider that showed some cyclical, positive developments going into the crisis.

KBRA reported prime auto annualized net losses and delinquency rates in March fell 11 basis points and 7 basis points month-over-month to 0.62% and 0.41%, respectively. On a year-over-year basis, net losses and delinquencies in its prime index dipped 6 basis points and 4 basis points, respectively.

Meanwhile, analysts determined annualized net losses and delinquencies in KBRA’s non-prime index dropped 68 basis points and 63 basis points to 8.69% and 4.99%, respectively. However, KBRA pointed out losses and delinquencies remain somewhat elevated on a year-over-year basis, ticking up by 17 basis points and 5 basis points, respectively, versus March of last year.

KBRA closed by mentioned its analysis of March’s asset-level disclosures also showed credit metrics mostly improved during the February collection period.

Analysts learned the percentage of prime and non-prime contract holders who went from 60-days delinquent to current in March rose to 25.1% and 16.2%, respectively, representing improvements of 326 basis points and 273 basis points versus the previous month.

Furthermore, KBRA said the percentage of prime contract holders who rolled from 60 days or more past due to charge-off fell 48 basis points to 14.0%. But the report noted the percentage of non-prime contract holders moving from 60-day delinquency to charge-off climbed 37 basis points to 22.3%.

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