Over the past several weeks, I’ve documented what looks to be the beginning of the end for the subprime auto bubble.
For the most comprehensive treatment, I suggest you have a look at “As Subprime Auto Bubble Bursts, Lenders Use GPS To Hunt Deadbeat Borrowers.”
The short version is that there are a whole host of lenders out there who are essentially perpetuating the very same “originate to sell” model that tanked the housing market in 2007 and that’s now proliferating within the seedy world of marketplace lending.
Put simply: some of the auto ABS deals that have gone off over the past couple of years have pushed the limits in terms of the loans that make up the collateral pool and invariably the chickens will come home to roost before it’s all over.
With that in mind, I bring you the following chart from BofAML which shows that “delinquencies and net losses have moved above 2004 levels.”
As the bank very gently puts it, we should “expect weaker performance in 2017.”