Normal
0
false
false
false
EN-US
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

NEW YORK — Fitch Ratings today published an updated asset-backed
sector specific criteria report for the auto loan industry and revealed there
have been no material changes from the previous version.

Therefore, Fitch said it expects no impact on existing
ratings.

Analysts indicated their latest report updates and replaces
the prior criteria report titled "U.S. Auto Loan ABS Rating Criteria," dated
April 20, 2011.

The firm explained the new report presents Fitch's
analytical approach to rating prime and nonprime U.S. Auto Loan ABS and
outlines the unique features of these transactions.

Additionally, the report details key rating drivers
associated with U.S. auto loan ABS as detailed below.

—Collateral Performance: Fitch's expectation on collateral
performance is a key driver of its ratings.

Fitch noted that it assesses performance expectations
through an analysis of an originator's historical static pool and
securitization data, including delinquencies, defaults, net losses, recoveries,
loss timing and prepayments.

The firm also mentioned that it analyzes the granularity of
the pool of loans backing a transaction, risk concentrations and collateral
characteristics of the pool to determine the overall credit risks present that
drive transaction loss frequency and loss severity.

—Payment Structure: Analysts pointed out the nature of a
transaction's payment structure and cash flow allocations will be a major
driver in assessing credit enhancement (CE) adequacy and rating levels.

Fitch stated that it uses a Microsoft Excel-based internal
cash flow model customized to reflect the transaction payment structure and
tests the impact of stressing various assumptions, including prepayments,
default timing, recovery rates and recovery lag.

Analysts said the output of the cash flow modeling is
reviewed to assess whether the rated bonds are fully paid, in accordance with
the transaction documents, in each stress scenario associated with a bond's
rating.

—Legal Risks: Fitch acknowledged legal risks can drive the
rating in the event that legal uncertainties pose a threat to the availability
of cash flows or the collateral itself.

The firm explained the transaction's legal analysis includes
a review of the legal structure and legal opinions furnished by the originator
to confirm cash flow derived from the assets will not be impaired (either as a
result of the bankruptcy or insolvency of the originator or any other
transaction party, such as a swap counterparty, or the trustee's lack of a
perfected first-priority security interest in the assets) or diminished (as a
result of taxation).

—Counterparty Exposures, including Seller/Servicer Operations:
Fitch stressed a counterparty exposures can pose a risk to transactions if the
relevant counterparties are a source of credit or performance weakness.

The firm went on to mention the analysis incorporates a
review of the counterparties of an auto loan ABS transaction, including
operational and corporate reviews, to determine its consistency with Fitch's
counterparty criteria titled, "Counterparty Criteria for Structured Finance
Transactions," dated March 12.

—Macroeconomic Risks: Finally, analysts conceded the
economic environment can have a material impact on U.S. auto loan ABS ratings.

As such, Fitch takes into consideration the strength of the
economy, as well as future expectations, by assessing key macroeconomic
indicators, such as unemployment.

Additional information is available at www.fitchratings.com.