WASHINGTON, D.C. -

Another high-ranking federal regulator tried to tie together what’s happening in vehicle financing nowadays to the mortgage-connected developments that created the Great Recession nearly a decade ago.

Comptroller of the Currency Thomas Curry gave a speech to the Exchequer Club on Wednesday focusing on credit risk. When Curry got to the auto financing market, he said, “This space today reminds me of what happened in mortgage-backed securities in the run up to the crisis.”

Analysts and other industry observers spent of portion of last year refuting claims about a “subprime bubble” and other comparisons linking auto financing to the mortgage market. Now Curry’s comments arrive as TransUnion reported back in August that its information shows the national auto loan delinquency rate declined to its lowest level in two years.

TransUnion’s auto delinquency rate — the ratio of borrowers 60 days or more delinquent on their vehicle installment contracts — dropped to 0.95 percent in the second quarter, down 3.1 percent from 0.98 percent a year earlier.

Despite those trends, Curry told the gathering at the Exchequer Club that “auto lending is another area of credit risk that we’ve had our eye on for several years.”

Curry’s assessment of the all industry wasn’t all pessimistic and negative.

“It’s good news for automakers and for the economy as well that sales are rolling along at record levels,” Curry said. “It’s also good for banks, which have supplied a significant amount of the financing that makes this activity possible, either directly to purchasers or indirectly through car dealerships.”

Curry shared that as of the end of Q2, auto financing represented more than 10 percent of outstanding retail credit in portfolios of institutions overseen by the Office of the Comptroller of the Currency. That level is up from 7 percent after Q2 of 2011.

“And increasingly, banks are packaging these loans into asset-backed securities rather than holding them in a portfolio,” Curry said. “These securities are being greeted by strong demand from investors, who no doubt remember that securities backed by auto loans outperformed most other classes of asset-back securities during the financial crisis.”

It’s at this point where Curry elaborated on his concerns  regarding how auto financing is unfolding, touching on contract terms and the volume going into subprime.

“What is happening in this space today reminds me of what happened in mortgage-backed securities in the run up to the crisis. At that time, lenders fed investor demand for more loans by relaxing underwriting standards and extending maturities,” Curry said.

“Today, 30 percent of all new vehicle financing features maturities of more than six years, and it’s entirely possible to obtain a car loan even with very low credit scores,” he continued. “With these longer terms, borrowers remain in a negative equity position much longer, exposing lenders and investors to higher potential losses.

“Although delinquency and losses are currently low, it doesn’t require great foresight to see that this may not last,” Curry went on to say.

In light of that assessment, Curry stressed that how these vehicle installment contracts — especially in the non-prime segment — will perform “is a matter of real concern to regulators.”

He added, “It should be a real concern to the industry.”

Curry closed his remarks by reiterating that subprime auto financing is one of the eight most important issues the Office of the Comptroller of the Currency currently watches.

“The OCC will hold the banks and thrifts we supervise accountable for managing those risks, and I expect the public to hold us accountable for ensuring the safety and soundness of the federal banking system,” Curry said.

“Looking back, it’s clear that all of us made mistakes in the run up to the financial crisis — regulators and financial institutions alike. And I believe all of us recognize we have to do better,” he continued.

“The direction we have charted at the OCC involves laying out high expectations in a transparent way and holding ourselves, as well as the banks we supervise, accountable for meeting those standards,” Curry went on to say. “I can’t promise you that we’ll never again face a serious financial crisis. But the best way to avoid major disruptions down the road is to take sensible and tough-minded steps now.

“And that, I can promise you, we are doing,” he added.