This page has been archived and commenting is disabled.
Sign Of The Times: Santander Floats First "Deep" Subprime Deal Since Crisis
Last week, we took an in-depth look at several of Santander Consumer’s subprime auto ABS deals. Santander is the largest subprime auto lender in the country with more than $15 billion in outstanding loans to underqualified buyers. Not surprisingly, the company also dominates the subprime auto ABS space accounting for a disproportionate share of YTD issuance. We noted that Santander’s first deal of 2015 (SDART 2015-1) carried an average FICO of 595, an average APR of 16.20%, and an average term of 70 months…
We went on to detail how Santander was set to float a new deal that looked even worse called DRIVE 2015-A. As the NY Times reports, the securitization “sold out in a matter of hours,” with the highest rated tranche yielding just 1%, proving beyond a shadow of a doubt that artificially suppressed interest rates are driving investors to take bigger and bigger risks as they desperately search for any semblance of yield.
More, via NY Times:
Delinquencies on auto loans have been rising, more Americans are losing their cars to repossession, and inquiries have begun into the subprime auto industry’s lending practices.
Nevertheless, Santander Consumer USA had little trouble last week finding buyers for its latest bond deal made up of auto loans to borrowers with deeply tarnished credit.
Many of the loans bundled into the $712 million deal went to borrowers with significantly lower credit scores than in many of Santander’s past bond deals.
Moody’s Investors Service expects losses as high as 27 percent on the bond, much larger than the 17 percent loss that the ratings firm had projected on a bond that Santander sold last year.
It’s easy to see the attraction for investors. Yields on the highest rated slice of the Santander bond were 1.02 percent, compared with the equivalent Treasury bond yield of 0.12 percent, according to Empirasign Strategies, a market data firm. In short, investors could earn about eight times as much yield, while ostensibly taking the same amount of risk.
As a reminder, the average FICO on this deal is just 552, according to Structured Finance News and nearly 13% of the loans backing the paper were made to borrowers with no FICO score at all. The truly remarkable thing about this particular deal is the degree to which it represents a complete round trip to the conditions that persisted pre-crisis:
For Santander, the latest bond represented a shift.
Santander has always made loans to borrowers with very tarnished credit. But the lender has usually financed those loans through private deals or held them on its books, instead of tapping the public market, according to a person briefed on the matter.
The latest bond deal was the first time that it has publicly sold securities backed by auto loans with such low credit quality since the financial crisis. The timing of the deal was driven by two factors: investor demand and a desire by Santander to free up more capital.
Put simply: the company wants the loans off its balance sheet so it can make yet more bad loans which it will also move off its balance sheet in order to make still more, and on and on. This is precisely the mentality that existed when the mortgage securitization machine was set on overdrive and it represents a dangerous turn of events at a time when even the market for highly-rated corporate paper is facing a liquidity crisis.
Delinquencies in the subprime space are already on the rise and in a pinch just about the last thing anyone is going to want to buy is paper backed by used car loans to unemployed borrowers with no credit. But as long as $700 million deals are going off without a hitch thanks to the global proliferation of NIRP, you can expect things to get far worse before they get better especially now that CNBC has unleashed the car-stock arbitrage on the few viewers the network has left.
»
- 20107 reads
- Printer-friendly version
- Send to friend
- advertisements -
NO CREDIT, BAD CREDIT, NO HEARTBEAT, NO PROBLEM!!!!
America, chewing and feasting on its own right arm.
We are one sorry nation.
Just floating down the shit river inviting everybody in for a swim. After all, what could possibly go wrong.....
The 550 fico special.
No money down. 5000 cash BACK at closing.
1200 month repayment plan. 3%....unless you take 15000 cash back then its 2.75%
*fine print. We own your family for the next 200 years. But who cares!!!
Loans of the future.
RIPS
We crave YIELD! We must have YIELD! All we care about is YIELD! Oh, and a bailout if we don't get what we crave and must have.
We crave cowbell. We must have cowbell. All we care about is cowbell.
This is called, "making shit up".
Anyone "investing" in this really needs to be fired.
As soon as my student loans are forgiven, I'm going to sign a loan on a new F150 Limited! God bless America!!
Dear Santander Loan Mgr,
I believe in Free Enterprise, and am a part-time blogger on ZH, but full time some days.
I've been at it for >2 years, make $0.00 from ZH, but have a 700+ score. What rate do I qualify for?
Finally, some Green Shoots!!!!
my roomate's step-mother makes $79 hourly on the laptop . She has been fired for 10 months but last month her pay was $18694 just working on the laptop for a few hours. see here... www.globe-report.com
wow, a FICO score of 552 is just pathetic. Hello sir, we checked and found that you have perfect credit... youve never paid anyone !!
There will be Obamacash pretty soon.....
Like student loans, all will be forgiven via a
pen stroke from King O. Only requirement is
to show your D voter registration card and the loan
vanishes. The new normal.
A system that requires credit scores to the degree that ours does is pathetic to begin with. We're all fucking sheep. Baaaaaaa!
Whatever happened to a solid handshake and a man's word?
That only works with local economies and people that you know. Otherwise, it was a myth. Most people will try to do right, but even in the mythical US 1950s, I guarantee that there were scam artists. Don't get butthurt if you are dosing business with somebody who believes in "trust but verify." That's just self preservation.
And a down payment.
Dupe.
Congress and the head butler at the Whorehouse are no doubt working on the 2015 Wall Street bailout right now but are waiting for the legislation to be written by Black Rock and Yank Paulson.
unicorns, toothfairys and 70 months @ 16.2%
Could be 100 months at 100% and it makes no difference they won't be paying it. You and I will.
16.2% for 70 months for something that will lose most of it's value the moment they sign the deal. People are fucking stupid trained debt monkeys.
It explains all the Mercedes and BMWs driving around the bad areas of town. And I just thought that represented the lucrative side of drug dealing.
Miffed
HEY! Those are "Certified Pre-Owned" Vehicles thank you!
Over in my father's neighborhood they have yards that are a foot tall... and Certified Pre-Owned cars.... everywhere. Kindof goes with all the syringes laying around.
Do gangbangers/deadbeats really plan to make payments?
Once had an identity thief steal parents id to open a line of credit to buy a computer. The ID thief was actually making the payments and this credit line went unnoticed until he went to jail on unrelated charges.
So most of the time no, but there are always exceptions to the rule.
Yes, and the war on drugs is what makes their business model profitable.
Whose business model?
Gangbangers. And a few others, but gangbangers in this specific case.
Liquor is legal and so is bootlegging so that kind of messes up your war on drugs argument
oh right, you just want to legalize pot so yo can toke without looking out for the po po
Liquor is legal. Making home beer is legal, but making ethanol for anything other than fuel is illegal. For those interested, the bureau of alcohol tobacco and firearms will issue a permit for FREE. How honest one chooses to be is up to them.
don't worry it's just worst since Lehman
yep
ALL about the monthly nut
can't afford $xxx for 60 months?
how about
$xxx - y for 84 months?
Sold!
And their existence makes mine all the more easier.
It's pretty easy to be the smartest guy in the room lately.
I look at it as cannon-fodder, and there is lots of it.
It's pretty easy to be the smartest guy in the room lately.
+1
and remember Fair Isaac (FICO) about a year ago made credit scores easier (eliminated health associated debt from scoring)
crazy
Yeah, death can be a real buzzkill....
if you go to the emergency room iirc you don't pay anything. for this crowd that deletion probably was insignificant
You don't recall correctly. Your ass will be billed for it. That's why so many bankruptcies are related to medical costs.
So we have a PIIG bank making shitty loans to shitty borrowers in the US. And then reselling the shit to shiity deal buyers...
One way or another Bailout BOHICA...
This is why we have CDS, bigger fools will be found....
First ex-wife has Santander stock. Bought with MY money! I can't win for losing....
Q: Why are divorces soooo expensive?
A: Because they are worth it.
Santander's ticker symbol used to be STD. Truth in advertising (for a change). They shouldn't have changed it.
Even if that's not true, I'd wanna believe that it was true.
Is there some risk of contagion?
Deep sub-prime = no pulse loans
Are we talkin' Marianas Trench deep?
Does this mean people with good credit will be paid to take out another car loan?
Nice. I need a new truck anyway.
Nope. Means you get to make your payments AND somebody else's payments. Kinda like bonus payments.
It is recomended you refinance the equity appreciation of your vehicle with a second vehicle improvement loan.
i actually received an offer from Wells Fargo not too long ago to refinance my car loan ...
Wells is leading the sub prime auto parade. At least until about 2 weeks ago.
They were leading the sub prime mortgage parade too. But Countrywide and some of the other shit house smoes took the bad press on that "event".
It's our patriotic duty as middle class americans to pay for bankers' and subprime borrowers' mistakes.
a mistake is unintentional - this on the other hand...
Next up, car equity line of credit.
how else you gonna get that Holly 4 barrel and those nice rims? as an Amercian consumer, i am entitled to the most life has to offer. TV commercials say so.
You are dating yourself. It's all about cams, turbos, and superchargers nowadays, along with an ECU flash/tune.
Sorta, Kinda, Maybe Already got it,,, What do you think those $2000 cash back is.... Only difference is it's in front of the loan.
oofaa...
Santander is my bank here in Jersey..
Iv'e asked many times of its health, and was told repeatedly (by the branch manager, that ive a good relationship with) that the N American operation is great..
Guess I need to ask again
Don't ask. Transfer.
i drive a piece of shit 1996 toyota camry and will until the fucking wheels fall off - the issue is vehicles being seen as a status symbol - escallades on dubs probably make up 75% of these bad loans
Time for Tom Vu's 'Look at Me Now' No-Money Down Real Estate Program for all the couch potatoes!
Buyers with good credit scores don't NEED car loans. What's a lender to do?
FICO is irrelevant these days, why its even being used today is a fallacy. The money that is floating around is printed money, just give the dam garbage away the sheep will spend it.
Which bank is carrying the dealer loans on inventory that will never get sold?
'Deep subprime lenders'.....ohhhh they mean the TBTF bailed out Wall St banks.
Looks full retard to me. Such fucking short attention spans.
S&P AAAA
Moody's AAAA
Fitch AAAA
Notable that former FDIC chair Sheila Bair is on Santander's board.
Gonna be ugly when all dem Escalades get popped and uncle sugar ain't a mullatto.