Delinquencies in deep-subprime deals have jumped since 2012
The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5 percent from 5.1 percent since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550.
Subprime borrowers are falling behind on their car loan payments at the highest rate since the financial crisis. General Motors Co. expects car prices to drop 7 percent this year
Santander, according to the AG’s settlement, even identified a group of dealers that had high default rates due in part, to the regular submission of inaccurate data on loan applications – most often involving inflated income.
Despite this, the bank continued to purchase loans from those dealers anyway and, in some cases, sold them to third parties.
And that might be why auto companies (with the exception of Tesla) are undervalued. When those subprime auto loans start defaulting faster, there's going to be a lot more used cars shoved into the market and crowd out the newly manufactured ones.
Submitted April 27, 2017 at 10:10AM by COMPUTER1313 http://ift.tt/2plL41r
