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SF Credit Brief: U.S. Auto Loan ABS Extension Patterns Diverged In September: Deferrals On Prime Loans Declined, But Rose On Subprime


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SF Credit Brief: U.S. Auto Loan ABS Extension Patterns Diverged In September: Deferrals On Prime Loans Declined, But Rose On Subprime


In September, new extension rates between U.S. prime and subprime auto loan asset-backed securities (ABS) diverged. For public shelves, the prime segment, with 17 issuers, turned in its fifth consecutive month of declines in extensions, as the weighted average monthly rate dropped 12.7% to 0.55% from 0.63% (see chart 1). In contrast, subprime extensions across the four public shelves (SDART, DRIVE, AmeriCredit, and World Omni Select 2019-A) increased 13.4% to 3.65% from 3.22%. We believe that the uptick in the subprime extension rate was primarily due to enhanced unemployment benefits dropping to $300 a month from $600. Some unemployed consumers continued to receive the $600 benefit into early August, but September was the first full month of the lower benefit amount. At the same time, many workers in people-facing businesses such as hospitality and retail remain unemployed or underemployed. Furthermore, Hurricane Laura, which caused significant damage to Louisiana at the end of August, also contributed to higher loan extensions; Louisiana had the highest extension rates in the U.S. for September for both prime and subprime pools.

Chart 1


All of the public prime shelves reported either lower or nearly stable extension rates in September as compared with August (see chart 2). However, all four of the public subprime issuers reported modest increases month to month. Even so, extension rates remained below July's levels (see chart 3). Nine of the 10 144a subprime issuers also reported higher extension rates in September than August, and in six of those nine cases, the September rates exceeded July's levels.

Chart 2


Chart 3


Percentage Of Loans In Active Extension Status Down From August

Even with the increase in the subprime monthly extension rate, the overall percentage of loans in public subprime auto loan ABS in deferral status continued to decline, falling to 5.87% in September from 7.88% in August (chart 5). In prime, the percentage of loans in extension status declined to 0.86% from 0.99% in August (chart 4).

Chart 4


Chart 5


September Extensions Often Included A Payment

Of the prime obligors receiving an extension in September, 50% made some form of payment in the same month. For example, across World Omni's transactions, 96.7% of its obligors receiving an extension in September made some form of payment: 10.0% full payment, 55.0% partial payment, and 31.7% advance payments. This breakdown of payments, though, is becoming generally less important in the prime segment as monthly deferrals are declining. For example, Fifth Third and CapOne reported that 100% and 50%, respectively, of their September extensions included no payments, but this was offset by their low extension rates of 0.04% and 0.39%, respectively, in September. CRART (California Republic Bank) and Ford, however, reported the highest monthly prime extension rates in September of 1.19% and 1.12%, respectively. Approximately 51% of CRART's September extended-contracts made a payment in the same month, and approximately 36% of Ford's September extended-loans made a payment.

Of the subprime obligors in the public transactions receiving an extension in September, 42.75% made some form of payment. World Omni Select 2019-A continues to stand out as having the most success in collecting payments within the same month that it granted an extension. In September, it received payments on 97.99% of the loans on which it granted an extension that month, with most of it coming in the form of full or advance payments. This may be partially due to its higher FICO score of 634, compared with a weighted average FICO range of 575-580 for AmeriCredit, 552-587 for DRIVE, and 600-623 for SDART. Meanwhile, Santander received September payments on only approximately 36% of the loans it extended that month on its DRIVE and SDART pools.

Chart 6


Majority Of Previously Extended Loans In Public Transactions Are In Repayment And Current

Seven months into this pandemic, we're observing that of the loans that have been extended since March, only 6.16% and 14.20% of the prime and subprime loans, respectively, remained in extension status as of the end of September (see table 1A). Additionally, nearly 8% and approximately 4% of the extended prime and subprime loans, respectively, either paid off as scheduled or prepaid. These pay-offs have so far exceeded charge-offs on previously extended loans, which cumulatively equaled 0.67% and 1.71% for prime and subprime loans, respectively, through September. The charge-offs, though, are mounting, increasing from 0.43% and 0.90%, respectively, through August. After accounting for extended loans that had fallen out of the pools and the loans that were still in extension status, 85.34% and 79.90% of previously-extended prime and subprime loans, respectively, were in repayment status as of the end of September.

Table 1A

Status of Loans Extended Since March 2020 As Of Sept. 30, 2020
% still in extension % matured or prepaid % repurchased % charged off % in repayment Total
Prime 6.16 7.74 0.09 0.67 85.34 100.00
Subprime 14.20 4.15 0.04 1.71 79.90 100.00

The majority of previously-extended loans that were outstanding as of the end of September were current--approximately 79% and 56% for prime and subprime loans, respectively (see table 1B). This is gradually slipping though, from approximately 80% and 59%, respectively, as of August month end, as more accounts roll into delinquency status. In the prime segment, most of the increase in late payments has been concentrated in 1-60 days (to 19.26% from 18.70% in August), while late payments in subprime increased for both 1-60 days (to 39.03% from 36.90% in August) and 61-plus days (to 5.00% from 4.27%) categories. In the absence of additional economic stimulus, we believe a high proportion of these later-stage delinquencies will convert into charge-offs.

The 60-plus-day delinquency on previously-extended loans is substantially higher than that on nonextended loans. The 1.65% level for prime was 9.0x the level of 60-plus-day delinquencies on non-extended loans (0.18%) as of September month end. The 5.00% level for subprime was 2.16x the level of 60-plus day delinquencies on non-extended loans (2.32%).

Table 1B

Status of Extended Loans In Repayment As Of Sept. 30 2020
Current 1-60 days DQ 60+ days DQ Total
Prime 79.09 19.26 1.65 100.00
Subprime 55.97 39.03 5.00 100.00

Of the previously extended contracts since March that have exited their forbearance periods, 84% of the prime and 71% of the subprime loans have made at least one full payment (see table 1C).

Table 1C

% Of Loans Extended Since March 30 That Have Made A Full Payment Or More(i)
Prime 83.61
Subprime 71.46
(i)Included in the percentage of contracts (in dollar terms) that have made at least one full payment, though Sept. 30, 2020, are advance payments (payments in excess of the scheduled amount).

Status Of Issuer-Specific Extended Loans Since March

Of the prime issuers, USAA has the highest proportion of previously-extended loans still in forbearance. We believe this is due to approximately 86% of their August extensions and 90% of their July extensions being for three months in duration (see chart 7).

BMW, USAA, and Ally have the highest percentage of previously extended loans that have been repaid in full (approximately 13%, 12%, and 11%, respectively), as reflected in the green portion of chart 7.

As expected, some of the previously-extended loans have been charged-off. CarMax and Nissan have the highest rates of cumulative charge-offs of previously extended loans since March of 1.35% and 1.15%, respectively. The lowest rates so far are being recorded by USAA, Fifth Third, Honda, and Ally, at 0.08%, 0.12%, 0.16%, and 0.29%, respectively.

Chart 7


Of the subprime issuers, AmeriCredit has the greatest percentage of previously-extended loans still in deferment (21%) (see chart 8). Meanwhile, World Omni Select 2019-A had the highest percentage in repayment status (86%) and the greatest percentage of previously extended loans that have repaid in full (nearly 8%). The deep subprime shelf, DRIVE, had the highest cumulative charge-off rate on these loans at 2.0%, and World Omni had the lowest at 1.1%.

Chart 8


Issuer Specific – Delinquency Status Of Previously Extended Loans Since March

Of the prime loans that have been extended since March and are still outstanding, Nissan and USAA had the highest percentage of performing non-delinquent loans (dollar basis) at approximately 96% and 95%, respectively, as reflected by the dark blue portion of the chart (see chart 9). CarMax and GMF had the highest percentage of previously extended loans that are 61-90 days delinquent at 2.85% and 1.80%, respectively, as reflected in the brown section of the graph. BMW and Harley had the highest percentage of previously extended loans that were 90-plus days delinquent at 2.12% and 0.75%, respectively, as reflected in the pink section of the graph.

Chart 9


Of the public subprime loans that have been extended since March and are still outstanding, World Omni Select 2019-A had the highest percentage of performing non-delinquent loans (dollar basis) at approximately 69%, as reflected by the dark blue portion of the chart (see chart 10). AmeriCredit had the highest percentage of previously extended loans that are 61-90 days delinquent at 4.40%, while DRIVE had the highest percentage of previously extended loans that were 90+ days delinquent at 1.66%.

Chart 10


Issuer-Specific Delinquency Trend and Cumulative Charge-offs

As illustrated in chart 11, most issuers are reporting higher 60-plus delinquencies of previously extended loans since March in September as compared with August. This is especially pronounced in subprime. A high proportion of these late-stage delinquencies are likely to become charge-offs. We're already seeing cumulative charge-offs on previously extended loans of 2% on the deep subprime DRIVE shelf. While this remains a low figure, many of the extended loans have only recently come out of extension status and a growing percentage are falling into the 60-plus day delinquency bucket.

Chart 11


84% And 71% Of Previously Extended Prime And Subprime Loans Have Made At Least One Full Payment

As reflected in chart 12, approximately 84% of previously extended prime loans and 71% of subprime loans have made at least one full payment since going into repayment status. This includes both the full payment percentage and advance payments, which are payment amounts that exceed the regular monthly payment. The percentage of prime extended loans that have made no payment though September was 12%. Prime issuers reporting the highest percentage of no payments on previously extended loans were CRART and VW (at about 15% a piece). In VW's case, this is likely due to a relatively high percentage of its extensions having been for three months (60% of its June extensions, 45% of July extensions, and 43% of its August extensions).

In subprime, the average percentage of previously extended loans that have made no payment through September was 22%, with DRIVE having the highest percentage of 24%.

Chart 12


Extensions By State: Louisiana Has The Highest Rates

In prime, the states with the highest extension rates in September were Louisiana (1.35%, which was up from 0.91% in August), Nevada (0.88%, down from 1.03%), and New Mexico (0.84%, stable with August) (see chart 13).

Chart 13


In subprime, the states with the highest September extension rates were Louisiana (6.65%, up from 3.62%), Wyoming (4.98%, up from 4.74%), and Hawaii (4.82% up from 4.30%) (see chart 14). Nevada came in fourth at 4.68% (up from 4.22%), and District of Columbia rounded out the top five with 4.67% (up from 3.08%).

Louisiana likely had the highest extension rates due to Hurricane Laura, which made land fall on August 27, bringing devastating damage to the state. Nevada and Hawaii continue to report high extension rates due to their high unemployment rates of 12.6% and 15.1%, respectively, in September. Both states derive significant business from the leisure and hospitality industries, which have been severely impacted.

Chart 14


Appendix: Data Notes

The data provided for most of the statistics in this article were generated from the Reg AB II loan-level filings, whether or not the underlying deals were rated by S&P Global Ratings. We've reported the information as presented in the issuers' loan-level filings, which may differ from the issuers' monthly servicing report data. Further, there could be differences among the issuers in how they grant extensions and how those extensions affect delinquencies. For example, some issuers may grant extensions that move an account to a less delinquent status, whereas most issuers grant extensions that will cause the account to be reflected as current. In addition, the loan-level data track all extensions, not just COVID-19-related extensions, which is what some issuers are reporting on their monthly servicing reports.

S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic. Reports that at least one experimental vaccine is highly effective and might gain initial approval by the end of the year are promising, but this is merely the first step toward a return to social and economic normality; equally critical is the widespread availability of effective immunization, which could come by the middle of next year. We use this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: As the situation evolves, we will update our assumptions and estimates accordingly.

Related Research

The authors would like to thank Bushra Dawawala for her research contributions to this report.

This report does not constitute a rating action.

Primary Credit Analysts:Amy S Martin, New York (1) 212-438-2538;
Timothy J Moran, CFA, FRM, New York (1) 212-438-2440;
Secondary Contact:Deegant R Pandya, New York (1) 212-438-1289;

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