Commercial banks and thrifts held $172.6 billion of non-mortgage ABS as of the end of the first quarter, a 10.2 percent drop from December 2013, according to a new Inside MBS & ABS analysis of call report data. The industry’s top ABS investor, TD Bank, increased...[Includes one data chart]

U.S. auto ABS may have hit a few potholes in recent months, but seasonal factors and investors’ hunger for greater returns is strengthening the sector, especially for subprime deals, according to Wall Street analysts. “Subprime auto ABS continue to benefit from the hunt for yield,” said Elen Callahan and Kayvan Darouian, analysts with Deutsche Bank, in a recent research report. Many deals are oversubscribed and are often upsized, they added. “With spread differentials of up to 600 basis points, depending on issuer and tranche, investors who are comfortable with the asset class’s recent performance are moving from the top of the credit structure, down to the first-loss piece, to pick up yield.” Increased demand for subprime auto ABS subordinate bonds is...

Ford Credit priced a $1.08 billion deal earlier this month backed by prime auto-loan receivables that included a noteworthy twist, according to John McElravey, director of consumer ABS research at Wells Fargo Securities. The deal will revolve for five years before paying principal with a soft-bullet maturity. “In our opinion, this deal adds an interesting new dimension to prime auto-loan ABS,” McElravey said in a recent report. “We would not be surprised if other prime lenders eventually adopted similar structures based on market pricing and the pace of investor acceptance. Upon reflection, it is somewhat surprising that more prime auto-loan ABS have not been structured in this way.” Moody’s Investors Service explained...

Standard & Poor’s ranked as the top rating service in the non-mortgage ABS market and also claimed the top spot in the sputtering non-agency MBS sphere, according to a new Inside MBS & ABS ranking of first-quarter activity. S&P rated seven of the 11 non-agency MBS issued in the first three months of 2014, or 78.0 percent based on dollar volume. Once the perennial leader in non-agency MBS ratings, S&P’s market share has been around 40.0 percent in recent years. DBRS ranked...[Includes two data charts]

Standard & Poor’s is seeking comments on a proposal for assessing operational risk posed by key transaction parties such as servicers in structured finance transactions. The request for comments follows a similar request from S&P in 2011. “We made a number of changes to the previous request for comment in view of the responses we received and our desire to enhance the risk considerations under the proposed operational risk framework,” said Joseph Sheridan, S&P’s criteria officer. “We also expanded the proposal’s scope. Where we believe operational risk could lead to credit instability and a ratings impact, the proposal would call for rating caps that limit the securitization’s maximum potential rating.” The rating service is proposing...

Legislation introduced earlier this month by Sen. Elizabeth Warren, D-MA, to facilitate refinance options for struggling student loan borrowers could negatively affect existing student loan ABS trusts while benefitting certain kinds of bonds at the expense of others, according to Wall Street analysts that closely follow the space. Overall, it’s considered a negative. The good news is, the legislation isn’t expected to be enacted this year. The bad news is, other similar measures are expected to emerge after the November elections. Introduced May 6, 2014, S. 2292, the “Bank on Students Emergency Loan Refinancing Act,” would permit...

There are some potential problems with the evolving peer-to-peer lending sector that need to be resolved before ratings can be assigned to the securitization of such assets, according to Standard & Poor’s Ratings Services. To start to get a handle on this emerging sector, it is important to understand P2P companies’ specific strategies and their target demographic of borrowers and investors. “Platform operators in the P2P lending sector are...

Charge-offs in the credit-card ABS sector reached a new low in the first quarter of 2014, due mostly to a steady decline in delinquencies and lower bankruptcy rates, according to Fitch Ratings. Loss rates continued to break new records heading into 1Q14, falling to 2.89 percent during the latest March distribution period, even as average charge-offs dropped to a record 3.00 percent for 1Q14 from 3.04 percent in 4Q13. “This marks 15 consecutive quarters of improvement and is approximately 25 percent lower year-over-year,” said Fitch Ratings Credit Card ABS Group Managing Director Michael Dean and Director Herman Poon in a new report. Late payments also fell...

In a development with potentially negative implications for lenders, servicers and investors in student loan ABS, the Consumer Financial Protection Bureau released a report this week critical of the “auto-default” practice seen in private student lending. According to the CFPB’s Mid-Year Update on Student Loan Complaints, borrowers say that some lenders demand immediate full repayment upon the death or bankruptcy of their loan co-signer, even in cases when the loan is current. Borrowers also said they confronted bureaucratic barriers to releasing co-signers from their loans, something that could help avoid auto-defaults. “Students often rely...

Major market indicators suggest the subprime auto ABS sector has finally returned to normal after the financial crisis, and prospects are good for a healthy market in 2014, according to research professionals at Wells Fargo Securities. “Subprime auto ABS has fully recovered from the recession, in our view,” John McElravey, head of consumer ABS research for the firm, and Bee Sim Koh, an associate in the unit, said in a recent market update. For example, new-issue volume in the sector rose...