Fitch Reviews Recent ABS Performance
NEW YORK — In its latest term ABS Credit Action Report, which reviews both auto lease and auto loan ABS trends, Fitch Ratings indicated that one year after the financial crisis hit, liquidity concerns have stabilized.
However, company officials reported that "Much of the structured finance landscape has been altered. While many sectors continue to struggle to find solid footing, term ABS, although not completely immune, has proven resistant to the severe credit and ratings adjustments found in other sectors."
Basically, while the Emergency Economic Stabilization Act of 2008 has helped, one of key factors for ABS performance is employment. Officials noted that this figure increased dramatically from 6.2 percent in September 2008 to 9.8 percent in September 2008.
"Recently, there have been signs of improvement in the number of initial jobless claims. Initial claims filed for the week ending Oct. 3 was 521,000, marking the lowest level since January," according to Fitch.
The company went on to report, "Although Fitch remains concerned about growing problems in consumer credit and unemployment, due to available credit enhancement and structural protections, ratings for prime senior tranches of ABS auto loan and credit card transactions have remained stable year-to-date."
Meanwhile, Fitch's ABS credit card receivables index results showed that late stage delinquencies were at 4.06 percent in September, near the record high reached in June 2009. Officials noted that higher portfolio yields have helped offset higher charge-offs and maintain excess spread levels.
Breaking it down, during September, there were 14 upgrades and four downgrades, compared with two upgrades and 15 downgrades in the previous month.
Through the first nine months of the year, there were 60 upgrades and 306 downgrades, compared with 289 upgrades and 838 downgrades during the same time frame of 2008.
In September, Fitch issued 14 upgrades in the auto lease sector and 10 in the auto loan sector.
Looking specifically at the auto lease sector, in September, the company upgraded two classes of Capital Auto Receivables Asset Trust 2006-SN1 transaction and two classes of the Capital Auto Receivables Asset Trust 2006-SND1A transaction.
"The upgrades reflect better than expected performance within the pools and significant improvement in vehicle auction values in more recent months," officials explained.
"Due to the increased levels of credit enhancement, the upgraded classes were able to withstand significantly higher base and stress case residual loss assumptions consistent with the ‘AAA' ratings," they noted.
Moving on to auto loans, Fitch pointed out that it upgraded nine and affirmed six classes from the Bank of America Auto Trust 2008-A transaction.
"The upgrades are a result of continued available credit enhancement in excess of stressed remaining losses. The collateral continues to perform within Fitch's base-case expectations," according to the company.
"Currently, under the credit enhancement structure, the securities can withstand stress scenarios consistent with the upgraded rating categories and still make full payments of interest and principal in accordance with the terms of the documents," officials explained.
Also, Fitch upgraded one class and affirmed one class from the Wachovia Auto Owner Trust 2006-A transaction.
"The upgrade reflects the continued stabilization of cumulative net loss performance and the building credit enhancement in the transaction. Through month 38 (the July collection period), the pool factor was 21.5 percent, total delinquencies of 30 days or more stood at 6.93 percent and CNLs were 3.21 percent," the company reported.