Earlier this month, the CFPB finally issued its long-awaited proposed rule to drastically scale back the ability of consumer financial companies to use pre-dispute arbitration clauses in their contracts for consumer financial products and services. The proposed rule would impose two sets of limitations on the use of pre-dispute arbitration agreements by covered providers of consumer financial products and services. First, it would prohibit providers from using such an agreement to block consumer class actions in court and would require providers to insert language into their arbitration agreements reflecting this limitation. “This proposal is based on the bureau’s preliminary findings – which are consistent with [its earlier] study – that pre-dispute arbitration agreements are being widely used to prevent consumers from seeking ...

Banks generally eased their lending standards for most types of residential mortgage loans in the first quarter of 2016, even as consumer demand for such credit increased, according to the Federal Reserve’s latest senior loan officer opinion survey. During the period ending March 31, a “moderate net fraction” of banks reported having eased standards on mortgages eligible for purchase by the government-sponsored enterprises, Fannie Mae and Freddie Mac, while a similar number of institutions indicated they had eased standards on “qualified mortgage” and non-QM jumbo mortgages, as well as on QM non-jumbo, non-GSE-eligible and on non-QM, non-jumbo residential mortgage loans. At the same time, banks left...

Thanks to a resurgence of deals backed by vehicle-related financing, non-mortgage ABS production rebounded strongly in the first three months of 2016, according to a new Inside MBS & ABS analysis and ranking. But ABS issuance levels came up well short of the volume generated during the first three months of last year, and a few key segments continued to limp along. A total of $41.42 billion of non-mortgage ABS were issued...[Includes two data tables]

Overall net losses in subprime auto ABS are on the rise due to an increasing number of deals from smaller lenders that cater to borrowers with weak credit. Amid this trend, however, subprime auto ABS performance varies by lender, according to a new report from Moody’s Investors Service. Moody’s analysts said competition among auto lenders has tightened as new, mostly smaller, lenders – driven by low losses on post-crisis auto loans and low interest rates – enter the market and compete for borrowers. The crowded market has driven...

Standard & Poor’s kept its position as the top provider of ratings for newly issued non-mortgage ABS last year, although the volume of deals the company rated fell 10.1 percent from 2014, according to a new Inside MBS & ABS analysis. S&P rated ABS bonds totaling $106.86 billion in new issuance in 2015, or 61.5 percent of deals for which rating information was available. That was down slightly from its league-leading 64.1 percent share of the rated 2014 ABS market. The company’s strong suits were credit card ABS and deals backed by vehicle loans and leases. Fitch Ratings finished...[Includes two data tables]

Disclosure requirements for publicly-registered ABS have prompted fewer investor-friendly changes than might have been expected, according to analysts at Moody’s Investors Service. The Securities and Exchange Commission adopted the so-called Regulation AB2 disclosure rule in August 2014 and a number of issuers have filed Form SF-3 registration statements in compliance with the rule. “Very few issuers have provided additional collateral and/or performance information beyond the data they were already disclosing prior to SF-3 registration statement requirements,” Moody’s said of auto ABS issuers. The rating service said...

The advent of mobile phone financing has given U.S. asset-backed securitization a new twist with its unique risks and strengths relative to other consumer ABS, according to a new report from Moody’s Investors Service. Mobile phone financing represents a shift from the previous business model of subsidizing phone purchases for customers with two-year service contracts. Many cell-phone makers and wireless carriers, such as Apple, Samsung Electronics, T-Mobile, AT&T, Sprint and Verizon, now use financing contracts in most of their phone sales. The most common form of financing is...

Last week, Toyota Motor Credit Corp. reached a $21.9 million deal with the CFPB and Department of Justice to settle allegations that the auto lender charged African-American, Asian and Pacific Islander borrowers higher interest rates than white borrowers for their auto loans, without regard to their creditworthiness. In addition to the pay-out to affected minority borrowers, TMCC agreed to change its pricing and compensation system to substantially reduce dealer discretion and accompanying financial incentives to mark up interest rates.As the bureau explained it, TMCC, as an indirect auto lender, sets interest rates, or “buy rates,” for consumers based on credit scores and other risk criteria. Those rates are then conveyed to auto dealers. Auto dealers are then allowed to charge a higher interest rate when they ...

New issuance of non-mortgage ABS fell 6.6 percent last year even though the market’s biggest segment pushed to a new post-crash high, according to a new Inside MBS & ABS analysis. A total of $173.05 billion of non-mortgage ABS were issued in 2015, the second-highest annual output since 2008. The direction, however, was less encouraging. New issuance tumbled 17.1 percent from the third to the fourth quarter, sinking to $30.69 billion – the lowest three-month total in over three years. But with record sales in the U.S. auto industry, securitization of vehicle-finance contracts increased...[Includes two data tables]

The prospects for consumer ABS in 2016 are a bit mixed. Auto ABS – especially subprime – appear susceptible to the Federal Reserve’s promised raising of interest rates this year and beyond, but credit card ABS are strong and performing well. “Rising interest rates could pressure U.S. auto ABS transactions, especially first on subprime deals,” analysts at Fitch Ratings said in a recent client note. While they expect last month’s initial rate increase by the Fed to have only a marginal near-term impact on borrowers, they said the plan to raise rates gradually over four years could increase the monthly debt burden on auto loan borrowers. “Although the rate increases are expected to affect the entire market, Fitch believes...