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ARTICLE · 13 JULY 2018

Subprime Auto Loan Crisis Chronometer Update

Davis+Gilbert LLP
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Observing the rising tide of borrower delinquencies in subprime auto lending, I'm reminded of that famous outburst by the former NFL coach, Dennis Green.

United StatesFinance and Banking
Joseph Cioffi
Joseph Cioffi
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"They are who we thought they were!"

Observing the rising tide of borrower delinquencies in subprime auto lending, I'm reminded of that famous outburst by the former NFL coach, Dennis Green. No one should be that surprised when subprime borrowers default. The question has always been and will continue to be whether credit enhancements – like overcollateralization and excess spread – will be sufficient to absorb the resulting losses. Now that lower grade tranches have gained popularity among investors, and lower tranches are in greater danger than ever of going underwater, it's a critical time for a performance check of the components of risk.

Performance

Total auto loan debt increased to $1.23 trillion in Q1 2018, up from $1.17 trillion versus a year ago, and accounted for 9.3% of the $13.21 trillion in national household debt – remaining greater than credit card debt, but less than student loan and mortgage debt, according to Federal Reserve Bank of New York

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