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NEW YORK — As financing availability continues to open up
for vehicle purchasers throughout the credit spectrum, Fitch Ratings believes
the move toward slightly riskier borrowers in prime auto ABS pools is unlikely
to present a near-term risk to bondholders.

However, analysts noted what is raising their concern.

"We believe prolonged softness in unemployment rates and
jobless claims could have a bigger impact," they pointed out.

Throughout the recovery, Fitch indicated auto ABS has
performed well. In the past month, the firm said, in fact, it has set records.

The latest Fitch report mentioned that delinquencies
declined 24 percent and annualized net losses (ANL) fell 11 percent month over
month. Meanwhile, the firm noted prime 60-plus day delinquencies are at a
10-year low of just 0.35 percent.

"This overall strength is attributable to a consistent
increase in used-car values and a decrease in unemployment figures and jobless
claims, as well an improvement in collateral pools featuring higher FICO
scores, lower loan to value ratios (LTVs) and shorter terms," analysts
explained.

Fitch recapped the Manheim Used Vehicle Value Index rose in
all five months from November to March.

"This reduced the loss severity in ABS pools," the firm
stressed.

Over the same period, Fitch indicated the U.S. seasonally
adjusted unemployment rate dropped from 9.9 percent to 8.2 percent. And initial
jobless claims hit a low of 364,000 in mid-March, down from 391,000 in
mid-November.

"These factors help reduce the frequency of default in ABS
pools," analysts added.

"Since the beginning of 2012, some issuers have subtly
loosened their underwriting standards," they continued. "In our view, this
practice is unlikely to present risk to the bondholder because the loosening in
standards, thus far, has been incremental, the pools are diversified, and the
collateral mix is solid.

"One potential risk in the recent numbers is an uptick in
jobless claims in late April to 388,000," Fitch analysts went on to say. "We do
not expect this to affect auto ABS at this time. However, a prolonged softness
in these and other employment measures could have an impact. We will continue
to monitor this situation and report on it promptly should our view change."

More Broad Economic Concerns

In other Fitch analysis, the firm contends stimulative
governmental policy actions may have boosted U.S. GDP approximately 4 percent
the last two years, but the moves raise questions about the sustainability of
the current economic recovery.

Fitch arrived at that determination through a study
conducted with Oxford Economics.

As the resulting report notes, fiscal stimulus contributed
to preventing a longer and deeper recession. However, Fitch stressed this
deficit spending has expanded U.S. indebtedness to unprecedented levels.

At the same time, researchers asserted the Federal Reserve's
accommodative rate policy has reached its threshold with short rates hovering
at close to zero.

"Employment remains critical to the sustainability of the
recovery," analysts reiterated. "The U.S. corporate sector remains healthy and
could boost economic activity through increased investment and hiring.

"Further, stabilization in the housing market would benefit
specific sectors within the economy, as well as promote more overall
confidence," they continued. "U.S. trade competitiveness has been improving and
may further bolster exports. However, the job creation needed for a sustained
economic recovery will become more difficult as government stimulus winds down."

Fitch went on to emphasize the uncertain future growth trajectory
of the U.S. economy increases risk in general.

"This uncertainty, in turn, has the potential to affect the
creditworthiness of all U.S. sectors, as well as foreign firms dependent on the
U.S. as an export market," analysts said. "Consequently, Fitch anticipates
limited rating upgrades within those sectors most closely tied to the U.S.
economy until it becomes clearer that organic growth in the broader economy is
taking hold."

For this study, Fitch collaborated with Oxford Economics to
develop counterfactual scenarios for the last four economic downturns.

"Essentially, a counterfactual is a scenario where
alternative economic conditions are compared to those that actually prevailed,"
study orchestrators explained.

The full report "Gauging the Benefits, Costs, and
Sustainability of U.S. Stimulus" is available at www.fitchratings.com. The
report includes several charts that provide historical context of the last
recession to previous ones between 1980-present.