Latest KBRA research examines geography of auto loan ABS performance
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On Wednesday, KBRA released research examining state-level auto loan asset-backed securities performance across the U.S., recapping three key takeaways in a news release.
Those top findings included:
—The Southeast reported the greatest credit stress, accounting for four of the five highest 60-day delinquency rates during the first half of this year.
That quartet included Mississippi (4.57%), South Carolina (4.54%), Georgia (4.46%), and Louisiana (4.17%).
KBRA noted New Mexico (4.40%) was also among the five weakest states.
On the opposite end of the spectrum, Vermont (1.50%), Minnesota (1.58%), Maine (1.86%), Nebraska (1.94%), and Connecticut (1.98%) reported the lowest rates, according to KBRA research.
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—Borrower credit quality and shelf composition explain only part of the geographic dispersion.
After adjusting for credit score and shelf mix, KBRA determined Louisiana performed 77 basis points worse than expected, followed by Georgia (60 basis points), Mississippi (51 basis points), South Carolina (37 basis points), and Alabama (32 basis points).
Conversely, researchers found that New Mexico — despite having one of the highest raw delinquency rates — performed 42 basis points better than expected.
—State-level performance differences have been persistent over time.
KBRA indicated several states, including Mississippi, Louisiana, Georgia, and South Carolina, have repeatedly ranked toward the weaker end of the distribution, while states such as Minnesota, Vermont, Maine, and Nebraska have consistently performed better.
“Most auto ABS transactions are geographically diversified, limiting the impact of any single state on overall deal performance,” KBRA said in the news release.
“However, geographic differences may be more relevant for whole-loan buyers and for securitizations with outsized concentrations in states performing meaningfully above or below expectations, particularly when those concentrations differ from a shelf’s historical geographic footprint,” researchers continued.
KBRA subscribers can access the entire report via this website.
