Strong performance of outstanding marketplace consumer loan ABS is bringing issuers and investors back to the market. But default risks will likely increase through the remainder of the year, according to analysts.
Growing student debt has exposed ABS backed by such loans to elevated risks, increasing the possibility the notes will not pay off by their final maturities.
ABS tied to Bojangles, powersports equipment and airline mileage programs recently hit the market. Meanwhile, a whole-business ABS from Planet Fitness was downgraded.
Loans backing securitized products are holding up fairly well even though the use of forbearance has increased. A combination of investor protections and changes in underwriting practices is helping.
The use of extensions on subprime auto ABS more than doubled in April on a monthly basis. The outlook for performance is uncertain with enhanced unemployment benefits set to end in July.
The creation of a U.S. sovereign wealth fund could grease the skids for an end to the conservatorships of Fannie Mae and Freddie Mac.
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