No one had suffered any losses, or at least it seemed no one
could remember having done so. S&P had not downgraded any
subprime auto loan ABS since just after the turn of the century or
any other auto loan ABS since 2011. Credit enhancements were widely
deemed sufficient to absorb any worst-case scenario. With a long
track record of success and protections in place, few blinked when
one non-bank lender, Honor Finance, went decidedly deep down the
credit scale.
It was 2016 and Honor Finance had just brought its HATS 2016-1
securitization to market. The appeal of HATS 2016-1 captured our
attention as an example of a potentially perilous penchant for
subprime auto ABS, but fast forward to the present and all signs
– from the performance of HATS 2016-1 to allegations against
Honor management – point toward Honor having even greater
significance in the trajectory of subprime auto ABS. Honor may
provide an example of both the type of performance that would cause
demand for
