Subprime Auto Loan Delinquencies Jump to Highest Level Since 2010

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Just in case you need some more evidence that the U.S. economy is rolling over.

Bloomberg reports:

More borrowers with spotty credit are failing to make monthly car payments on time, a troubling sign for investors who have snapped up billions of dollars of securities backed by risky auto debt.

Delinquencies on subprime auto loans packaged into bonds rose in January to 4.7 percent, a level not seen since 2010, according to data from Wells Fargo & Co.

Rising delinquencies come as a warning sign that more loans may end up in default down the road, said John McElravey, an analyst at the bank. What may be most troubling, however, is that the default rate is already climbing, up to 12.3 percent in January from 11.3 the prior month. That is the highest rate since 2010, the data show.

Securities backed by auto loans are structured to absorb a portion of anticipated defaults, but concerns have mounted over the last year that cumulative losses on auto loan securitizations may end up exceeding initial estimates, thanks to declining underwriting standards.

Didn’t we just do this with housing a few years ago?

Of course, this emerging debacle has been a long time coming. See:

Subprime Auto Loan “Titan” Foolishly Proclaims There’s Nothing to Worry About

Gotta Keep Dancing – Honda Executive Laments “Stupid” Auto Loans Driving U.S. Sales Higher

The Debt Bubble Expands as Auto Loan Amounts Hit a New Record

Just Keep Dancing: Introducing the 97-Month Auto Loan

Same as it ever was.

In .Liberty,
Michael Krieger

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  1. Apparently, there are those who make money selling these loans and people buying the risk as securities. What I don’t understand is why anyone would buy the risk? Loan backed securities, with regular folks owing the money, seems much too risky to me!

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