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Fitch: U.S. Auto ABS to Avoid Potholes in 2013
March 7, 2013 / 3:22 PM / 5 years ago

Fitch: U.S. Auto ABS to Avoid Potholes in 2013

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Fitch Voice: Structured Finance here NEW YORK, March 07 (Fitch) Competitive industry pressures, particularly in the subprime sector, are leading to looser underwriting which may in turn push losses modestly higher in U.S. auto ABS, according to Fitch Ratings. In its latest 'Fitch Voice: Structured Finance', however, Fitch says that low actual losses, strong average credit quality and stable or increasing credit enhancement levels will help steer auto ABS performance away from any significant deterioration. FICO and credit tier distributions are providing one of the clearest indications of loosening underwriting standards. Since the middle of last year, Fitch has seen more originations geared towards more inclusion of the bottom most tier FICO scores. 'With the lowest tier FICOs beginning to make up a larger percentage of an overall ABS pool, losses have the potential to accelerate over time,' said Managing Director John Bella. Competitive pressures are likely to be most acute in the subprime sector where Fitch notes that over 20 subprime issuers have come to market with ABS transactions since 2008. Some experts are also predicting the wholesale markets to weaken somewhat. This along with used car prices are areas that Fitch will be watching closely since any softening outside these current expectations might worsen the outlook for losses. Another trend worth noting is the increasing amount of 'innovation' beginning to show up in auto ABS structures. The sector has long been known for sticking with traditional features like simple sequential pay structures and relatively short average lives that have kept losses very low. However, 'innovations not seen since 2007 are beginning to show up again in new auto ABS deals, making them potentially more volatile if the broader economy deteriorates,' said Bella. 'Fitch Voice: Structured Finance' provides a series of topical articles on developments in the global structured finance sector. The latest piece, 'KEYS to Cars in 2013: Will Auto ABS Avoid the Potholes?' is available at 'www.fitchratings.com'. Contact: John Bella Managing Director +1-212-908-0243 Fitch Ratings, Inc., One State Street Plaza, NY, NY 10004 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

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