Fitch: Mexico's Autofinanciamiento ABS Perform Ahead of Expectations
"Fitch-rated autofinanciamiento ABS have performed well, with observed delinquencies below the expected base case levels, and excess spread sufficiently covering any losses. Overcollateralization levels for Fitch-rated autofinanciamiento ABS have maintained at target levels and are expected to remain stable," said Rene Ibarra, Senior Director.
While delinquency levels tend to be higher for autofinanciamiento loans than for pools of prime auto loans, credit enhancement levels have been more than sufficient to cover these differences. Within the Fitch-rated Mexican auto ABS portfolio, securitized pools of prime auto loans exhibit delinquency ratios around 1% -3% while delinquency ratios for autofinanciamiento loans are 5% - 9%.
The transactions feature granular and homogeneous loan portfolios with established concentration limits, target and minimum overcollateralization levels, certain eligibility criteria, liquidity reserves and cashflow waterfalls benefitting from specific triggers that lead to turbo amortization should asset quality deteriorate.
Despite being revolving transactions, a solid and lengthy origination history together with adequate eligibility criteria and other structural protections help mitigate some of the risks inherent to revolving structures.
Autofinanciamiento lenders are using securitization to fund an increase in loan demand as domestic auto sales surpassed pre-crisis volumes in 2015. Overall auto sales and loan growth have been propelled by low interest rates and rising consumer confidence. Financed units as a percentage of locally sold vehicles reached 62% in 2015.