NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases research which examines the liquidation backlog taking place in auto loan ABS.
While the prevailing belief in the market seems to peg higher used car values as the reason for the elevated recovery rates seen across most securitized auto loan pools since the start of the, an analysis of the loan-level data suggests this may not be the main cause. Instead, repossession moratoriums have led to longer-than-usual recovery lags for loans that were charged off in the early months of the pandemic. As a result, vehicle liquidations were delayed until later in the summer and fall, leading to inflated aggregate recovery rates during those months.
As the backlog in liquidations begins to shrink, we expect securitization recovery rates to fall back to normalized levels over the coming months, a trend that appears to have started during the November collection period and first reported in last month’s asset level disclosures. We expect this to place some upward pressure on securitization monthly net charge-off rates, even as the second round of government stimulus should delay any corresponding rise in delinquencies and gross charge-offs.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.