Posts Tagged ‘bubble’

Subprime Auto Defaults are Soaring

Posted on August 02, 2017 by Laura Lam

It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud.  Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.  A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.  In July, 90-day auto loan delinquency rates eclipsed 3.8%, their highest levels since the financial crisis. Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great…

Auto Loan Defaults Not Likely to Cause Next Bubble

Posted on April 10, 2017 by Laura Lam

An increase in the delinquency of risky auto loans probably won’t send the U.S. economy into the doldrums the way the mortgage loan crisis did in 2008-09, but it will likely pinch car sales.  Borrowers are falling behind on most subprime car loans, but deep subprime consumers – those with credit scores below 550 – have deteriorated fastest, according to a report by Morgan Stanley. Just like mortgages, many of those loans have been packaged into bonds, “securitized” in Wall Street parlance, and sold across the world to investors searching for yields in the wake of the financial crisis. Car…

Flashback: Subprime Auto Loans Recall ’90s Bubble

Posted on March 24, 2016 by Laura Lam

Rising delinquencies in subprime auto lending have drawn comparisons to the mortgage meltdown of nearly a decade ago.  But to get a clear understanding of what is unfolding in the increasingly embattled subprime auto sector, it makes sense to look back two decades, to the 1990s.  At that time, the opportunity to earn high yields by lending to car buyers with low credit scores sparked a rash of competition. The upstart lenders used the securitization markets to expand rapidly. Over time, underwriting standards deteriorated, and more subprime auto loans started to go bad. Over the past several years, that same…