CFPB Deputy Director Steven Antonakes revealed recently that the bureau is increasingly concerned about the subprime auto finance sector and will crack down on any practices that prove to be too risky for consumers. Speaking at an event of the Consumer Bankers Association, Antonakes identified a loosening of credit in the subprime auto loan market as one of the emerging risks the bureau is paying close attention to. “From our standpoint, it is not inherently troubling that more consumers are getting auto loans; under the right conditions, increased access to credit is good for the economy and individual upward mobility,” the deputy director said. “However, we have noticed some trends in connection with this credit expansion that give us cause ...

Commercial banks and thrifts reported another decline in their ABS holdings during the fourth quarter of 2014, according to a new Inside MBS & ABS analysis of call-report data. In aggregate, banks and thrifts held $159.22 billion of ABS in their held-to-maturity and available-for-sale retained portfolios as of the end of last year. That was the industry’s lowest level of ABS investment since the middle of 2012, and it represented a 3.1 percent drop from a revised third-quarter total of $164.35 billion. The biggest component in the aggregate portfolio was...[Includes two data charts]

A number of industry groups ramped up their efforts to convince the CFPB to revisit its auto financing enforcement policy, after the release of an industry-funded report that challenged the analysis that undergirds it. The impetus behind the challenge is a Charles River Associates study commissioned by the American Financial Services Association that analyzed the complexities of the indirect finance market and evaluated the CFPB’s current fair lending investigations, with special attention to the proxy methodology used by the bureau. The CRA study concluded that “observed variations in ‘dealer reserve’ at the financial institution portfolio level are mitigated when market complexities are considered and adjustments are made for proxy bias and error.” This suggests to industry representatives that there are ...

Standard & Poor’s emerged as the top rating service in both non-agency MBS and non-mortgage ABS securitizations in 2014, according to a new Inside MBS & ABS ranking. S&P rated $8.91 billion of non-agency MBS last year, or 25.4 percent of total issuance. Rating information is not available on most scratch-and-dent transactions and re-securitizations that are typically issued as private placements. S&P’s market share was down from 40.0 percent of non-agency MBS issued in 2013, when there were more transactions with multiple ratings. DBRS, which reports its ratings on re-securitizations, actually was involved...[Includes two data charts]

A total of $185.32 billion of non-mortgage ABS were issued in 2014, the highest annual production level for the market since 2007, according to a new Inside MBS & ABS analysis and ranking. ABS issuance was up 12.0 percent from the prior year, with solid gains in three of the market’s key sectors: auto finance, credit cards and business loans. The weakest link was the student loan ABS market, where annual production fell 25.4 percent from 2013 and slipped to its lowest level since 1999. Vehicle finance deals were...[Includes two data charts]

Issuers of auto ABS are loosening underwriting standards and delinquencies on subprime auto loans are increasing, but industry analysts suggest that there is little cause for concern. Performance remains much stronger than the delinquencies seen during the financial crisis and issuers are unlikely to loosen underwriting to the extent seen in the run-up to 2008. For independent finance companies, 60+ delinquencies increased by 13.7 percent in the past year, from 1.82 percent in the third quarter of 2013 to 2.07 percent in the third quarter of 2014, according to the latest data from Experian Automotive. Independent finance companies focus primarily on lending to subprime borrowers, and their delinquency trends outpaced any increase in delinquencies for other types of lenders that lend primarily to prime borrowers. Peter McNally, a vice president and senior analyst at Moody’s Investors Service, said...

The strong growth in issuance of jumbo mortgage-backed securities seen since 2010 stumbled in 2014, according to a new ranking and analysis by Inside Nonconforming Markets. Some $9.79 billion in jumbo MBS were issued last year, down 25.4 percent from activity in 2013. Issuance has been constrained by bank portfolio demand for jumbo mortgages. The spike in interest rates in 2013 led to nine months of very low issuance. Rates have since fallen and a number of new jumbo MBS issuers have entered the market, but quarterly volume has struggled to reach the levels seen in early 2013. Those looking for a silver lining could...[Includes one data chart]

The CFPB’s proposed rule, “Defining Larger Participants in the Automobile Financing Market,” didn’t win many friends in the auto finance sector during the public comment period which closed earlier this month. The proposed rule would generally allow the bureau to supervise larger nonbank auto finance companies – those that make, acquire or refinance 10,000 or more loans or leases in a year – for the first time at the federal level. The bureau also indicated that it considered, and is continuing to consider, the establishment of a higher threshold – 50,000 annual originations, and one that is lower – 5,000 annual originations.The National Independent Automobile Dealers Association told the CFPB it should decline to establish any threshold that is lower than the 10,000 ...

Wall Street analysts are generally projecting a year of stability for most asset classes in the consumer ABS space for 2015, despite a few more losses and an anticipated increase in interest rates. The one exception might be subprime auto. Analysts at Standard & Poor’s Ratings Services cited a favorable overall environment characterized by a strengthening economy, healthy consumer credit fundamentals, and robust structural protections in ABS transactions. “We expect...

Toyota Motor Credit Corp., the captive finance arm of Toyota, recently revealed that it has received a letter from the CFPB and the Justice Department alleging that certain practices related to discretionary dealer markup resulted in discriminatory lending aimed at minorities and low-income borrowers. In a recent Form 8-K filing with the Securities and Exchange Commission, TMCC said the agencies have requested certain information about the company’s purchases of auto finance contracts from dealers as well as related discretionary pricing practices. “On Nov. 25, 2014, we received from the agencies a letter alleging that such practices resulted in discriminatory pricing of loans to certain borrowers in contravention of applicable laws, and informing us that they are prepared to initiate an ...