Auto ABS Flashcards
What is the main difference from auto loans to residential mortgages?
However, auto loans have a much shorter amortization schedule
and a smaller loan amount. Additionally, unlike residential mortgages, auto
loans are secured by collateral whose market value is depreciating instead of
appreciating.
Can auto loans be prepaid without penalty?
Like residential mortgages, auto loans can be prepaid without penalty.
Who are the three main issuers?
(1) domestic captive prime issuers, such as the finance unit of Ford and General
Motors; (2) foreign captive issuers, such as the finance unit of Japanese,
Korean, and European car manufacturers; and (3) non-prime and sub-prime
issuers such as auto finance companies like Household and AmeriCredit.
Is prepayment a frequent phenomenon?
But unlike residential mortgages, prepayment is
not a frequent phenomenon, as the borrowers most likely would not sell
their automobiles before the short maturity of the loans. More significant,
borrowers of auto loans very rarely refinance their loans when the market
interest rates on auto loans decline, though during the promotional period
of zero percent financing there has been the occasional spur of prepayment.
What is the predominant reason for prepayment for RMBS?
refinancing
How have investment grade credit cards or auto loans performed?
Investment-grade credit ratings of credit card ABS and auto ABS (hereafter,
simply ABS) have been known for their strong credit performance. Noninvestment-grade credit ratings of ABS, however, have not performed so impressively.
How did triple A ratings ABS perform during the financial crisis?
During the recession years of 2008 and 2009, triple-A–rated ABS
continued to perform strongly with very few downgrades, although the
same cannot be said for lower credit ratings.1
