Download Citi - Auto ABS Primer PDF

TitleCiti - Auto ABS Primer
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Total Pages44
Table of Contents
                            Roadmap to Retail Auto Loan ABSs
	Introduction
		Benefits of Auto Loans
	Auto Loans — Collateralized Consumer Assets
	Market Segmentation and Loan Characteristics
	Loss Curves
		Prime Loss Curves
		Subprime/Nonprime Loss Curves
		Why We Look at Loss Curves
Structures
	Typical Auto Loan Structures
	Cash Flow
		
			Sequential Payments
		Pro Rata Payments
		Cash Reserve Accounts
		Structure Standardization
	Alternative Structures
		Prefunding Structures
		Soft Bullet Structures
Credit Enhancement
	
		Credit Enhancement Varieties
	Rating Agency Credit Enhancement Requirements
Other Risk Factors
	Servicing Risk
		Seller/Servicer Financial Stability and Access to Liquidity
		Servicing Intensity of Collateral
		Third-Party Servicing, If Necessary
	Underwriting and Collections Risks
		Delinquency and Loss History
		New Versus Used Mix
		Minimum, Maximum, Average Loan Balance
		Seasoning, Weighted Average Maturity, and Mix of Contracts
		Geographic Diversity
		Other Information
Payment Speeds
	Prime Auto Speeds
	Subprime and Nonprime Auto Speeds
To Call or Not To Call — Auto ABSs’ Early Call Op
Other Auto ABS Products
	Dealer Floor-Plan Loans
		Definition
		Structures
		Credit Enhancement
		Dealer Floor-Plan Credit Losses
		Contingent Recourse in Dealer Floor-Plan Structures
		Manufacturers Buyback Obligations — A Residual Va
		Manufacturer Debt — Staggered Maturities
	Fleet Financing for Auto Rental Companies
		Credit Enhancement
		Manufacturer Contingencies
	Auto Leases
		Risks and Structure
		Auto Leasing Residual Value
			Lease Vehicle Turn-Ins
			Auto Lease Credit Losses
			Leasing Losses Frequency and Severity
			Auto Leasing Structure
		Pension Benefit Guaranty Corporation Risks to Lease Transactions
	General Motors Novel Structure Eliminates PBGC Risk
	Vicarious Tort — No Longer a Risk
Appendix
	List of Prime, Nonprime, and Subprime Lenders
                        
Document Text Contents
Page 23

September 15, 2005 Guide to Auto ABSs



Citigroup Global Markets 23

Seasoning, Weighted Average Maturity, and Mix of Contracts

Seasoned loans perform better than unseasoned loans. Seasoning refers to how long
ago the servicer granted the loans. The prospectus also discloses the remaining term
to maturity. The contract maturities are usually well distributed to provide a
consistent cash flow stream.

Underwriters have been granting longer maturity contracts — up to 72 months and
sometimes even 84 months in recent years. The longer maturity makes the payment
more affordable. On the other hand, the collateral loses value as it ages, and the
collateral is further underwater later in the contract age. However, no evidence to
date indicates that longer maturities are resulting in greater losses. Loss curves
appear to be more back-ended (see Figure 6).

Geographic Diversity

A geographically well-balanced pool is desirable. Large regional or state
concentrations might invite further inquiry into the laws or loss patterns peculiar to
that region. The rating agencies will generally require extra credit enhancement to
compensate for any unusual geographic concentrations.

Other Information

The following information is generally not provided in prospectuses, but investors
may have opportunities to ask for this information at issuer meetings or on-site visits:

➤ Average FICO score, range, and mix of scores. This provides a general idea of
the obligor quality of the pool to compare against other issuers. The minimum
FICO score acceptable to the servicer provides insight into the range of obligor
quality.

➤ Average advance on vehicle value. This is more important for sub-prime
lenders. Higher losses are generally experienced on high advance rates. Most
lenders will generally advance no more than 105% to 110% of NADA wholesale
value, plus tax, tags and insurance.

➤ First payment defaults (for subprime issuers). First payment defaults should
be negligible. This should be a low number, even for subprime lenders. First
payment defaults should be in a range of 1% or less.

➤ Extension policies. Extensions can lengthen the average life of the pool so many
transactions cap the permitted length and amount of extensions in a pool. An
extension is where the servicer permits the borrower to take one or more
payment holidays. In order to avoid disguising credit problems, some servicers
require that the contract be current before granting an extension.

➤ Underwriting decision model — automated or subjective. Many lenders have
risk-based proprietary decision-making systems. Understand the lenders strategy
and history. Insight into policy exceptions is also valuable.

Seasoned loans
perform better.

Geographical diversity
is desirable.

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