Another Warning Sign Flashes for Subprime Auto Loans - Bloomberg - Data may show subprime consumers are weaker, Wells Fargo says - Last decade, slowing credit card payments were early alarm
...Growth in auto debt since the financial crisis has set off alarm bells on Wall Streetand among regulators who are concerned that borrowers may be overburdened and used car prices are falling. Government enforcement officials have expressed concernthat lenders may be making loans that borrowers can’t repay, and packaging them into bonds that investors are willing to buy.
Total issuance of subprime auto loan-backed securities rose to $7.1 billion in the first quarter from $5.9 billion in the same quarter last year, according to data compiled by Bloomberg. The growth came even as losses from the debt have risen beyond levels last seen in the aftermath of the 2008 financial crisis.
The researchers at Wells Fargo, the number one seller of bonds backed by subprime auto loans, have said that the bonds pose few risks to bondholders, even though they recommend investors cut their risk exposure because of valuations.
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