Fitch: Prime Auto ABS Show Record Annualized Net Losses
NEW YORK — Fitch Ratings announced this week that annualized net losses on prime auto loan asset-backed securities in August came in at a record level.
More specifically, U.S. prime auto loan ABS hit a record high of 1.73 percent in August, just above the previous high set in early 2003.
According to Fitch, Auto ABS performance in 2008 continues to be impacted by the poor state of the U.S. economy, including rising unemployment, deteriorating consumer health and lower wholesale vehicle values.
The 2007 vintage is producing the highest levels of losses when compared to vintages going back to 2000, driving Fitch's ANL index higher in 2008.
However, despite this fact, negative rating actions in 2008 have been minimal, the company highlighted.
Even with these elevated levels of losses, structural features and credit enhancement, along with transactions' deleveraging, have helped to limit negative ratings actions in 2008, officials noted.
ANL rose 22 percent in August over July, driving losses 101 percent higher when compared with August 2007.
In the prime sector, Fitch's 60-plus day delinquency index was unchanged at 0.71 percent in August over July and 20 percent above 2007 levels.
Fitch indicated that it has upgraded 29 prime auto ABS subordinate tranches in 2008, down from 66 in 2007.
During August, Fitch upgraded 11 tranches from four prime transactions including upgrades on transactions of U.S. domestic captives.
Additionally, the company said it continues to issue upgrades on subordinate notes, albeit at a slower rate than in 2007.
"In the historically weak fall months, Fitch expects ANL may approach the 2-percent level as predicted at the beginning of the year," explained John Bella, managing director.
Meanwhile, the subprime auto ABS 60 days-or-more delinquency index came in at 3.85 percent in August, 6 percent higher than July.
ANL were at 7.45 percent for the month, which is 14 percent above July. On a year-over-year basis, this measurement reached 31 percent higher than in August 2007.
The weakest period of performance for subprime losses was in late 2003 when losses were approximately 9.50 percent to 10 percent, so current levels remain below this range, officials pointed out.
Fitch's indexes track the performance of 101 prime and subprime auto ABS transactions outstanding, totaling $61.42 billion, of which 68 percent are prime auto ABS and the remaining 32 percent are subprime auto ABS.