When last we checked in on the subprime auto ABS market Santander Consumer was busy paying the US government $9 million to settle charges that the subprime auto lender had illegally repossessed some 800 vehicles from active duty service members and had attempted to extract fees from another 350 soldiers in connection with repossessions the bank didn’t even execute. As we noted at the time, Santander wasn’t about to let a few disgruntled soldiers and a measly $9.35 million fine slow down the securitization machine which is why the lender was launching the DRIVE-2015 A deal, a $700 million securitization backed by car loans to borrowers with an average FICO of 552 although, as we pointed out, 13% of those whose loans wound up in the collateral pool had no FICO at all. That is what is known as “deep subprime.”
Well, things just got a lot “deeper,” because as Bloomberg reports, Texas-based Skopos Financial has both raised and lowered the bar at the same time by setting a new standard for what counts as questionable collateral while simultaneously proving that in a NIRP world, investors are willing to plumb the FICO depths for yield:
Skopos Financial, a four-year-old auto finance company based in Irving, Tex., sold a $149 million bond deal consisting of car loans made to borrowers considered so subprime you might call them—we dunno—sub-subprime?
Details from the prospectus show a whopping 20 percent of the loans bundled into the bond deal were made to borrowers with a credit score ranging from 351 to 500—the bottom 6 percent of U.S. borrowers, according to FICO. As a reminder, the cut-off for "prime" borrowers is generally considered to be a credit score of around 620. More than 14 percent of the loans in the Skopos deal were made to borrowers with no score at all. That means the Skopos deal has a slightly higher percentage of no-score borrowers than the recent subprime auto securitization recently sold by Santander Consumer, which garnered plenty of attentionfor its dive into "deep subprime" territory.
Who is Skopos Financial you ask? We’ll let them tell the story in their own words:
In 2011, Skopos Financial opened its doors with one goal in mind making tough, deep subprime auto loans easier to finance for dealers.
Leveraging our sophisticated, patented iLender technology and visionary management team, Skopos provides a streamlined process for franchise dealers to finance customers with low credit scores.
As an indirect auto lender, Skopos offers solutions for car buyers with no credit, low FICO scores, or a previous bankruptcy, repossession or foreclosure. And the best part is the speed. Skopos' dealers enjoy fast underwriting, fast approvals and fast funding.
Yes, the “best part is speed.” We suppose the process is quite efficient considering there appear to be no underwriting standards whatsoever.
As for the “visionary” management team, have a look at the following profiles which seem to indicate that at least for some industry veterans, Santander Consumer isn’t quite subprime-y enough (note that there’s a Countrywide link in there as well for good measure):
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We suspect we'll be talking more about Skopos in the not-so-distanct future, but for now, just note that the amount of paper floating around out there backed by the worst of the worst in terms of auto loans to underqualified borrowers just went up by another $150 million. With the market's biggest subprime issuer (Santander Consumer) increasingly at home in the deep subprime space, just about the last thing anyone needs is more supply from an entity run by former Santander Consumer execs.