Securitization in Focus — August 2023
Asset-Backed Securities (ABS)
Auto (month-over-month)(%)
|
Prime Auto
ABS |
Subprime
Auto ABS |
60+ Day
Delinquencies |
Up to 0.37 |
Up to 4.87 |
Defaults
|
Up to 0.80 |
Up to 10.60 |
Voluntary prepayment speeds slowed month over month and year over year for prime and subprime auto deals as consumers deal with back-to-school expenses and tax refunds have been expended.
Bifurcation in
Consumer ABS (%)
Marketplace Lending
(loans generated online) (YoY)
| Delinquencies |
Defaults |
| +0.70 |
+4.84 |
Consumer ABS Loans (YoY)
| Delinquencies |
Defaults |
| -0.23 |
+1.94 |
Credit Card (MoM)
| Delinquencies |
Charge-offs |
| +0.27 |
+0.59 |
Residential Mortgage- Backed Securities (RMBS)
60+ Day Delinquencies
Home Prices
The S&P/Case-Shiller US National Home Price Index has returned to mid-2022 post-COVID peak, despite significant increases in mortgage rates since the Fed began this tightening cycle.
S&P/ Case-Schiller US National Home Price Index
Issuance Update
Issuance ($B)
|
ABS |
CMBS |
Non-
Agency
RMBS |
| 2022 |
243 |
186 |
136 |
YTD 2023
|
171 |
60 |
41 |
2023
Annualized |
228 |
81 |
55 |
Commercial Mortgage- Backed Securities (CMBS)
About the fundamentals2
|
SASB |
Conduit |
CRE
CLO |
| Balance ($B) |
254 |
362 |
79 |
Watchlist (%)
|
32.6 |
19.5 |
30.9 |
Special
Servicing (%) |
6.9 |
6.0 |
0.7 |
+60 Day
Delinquencies (%) |
2.7 |
3.2 |
0.6 |
Quality divergence
High-quality CMBS offer decent spread pick-up relative to single-A corporates in the current market.
Hurricane Idalia impacts
- Increase in hotel and self-storage demand
- Rebuilding positive for local economy
- Spike in special servicing and delinquencies
418 CMBS loans
$8.9B total balance
334 deals
>50% tied to multifamily
47% exposure in Tampa Bay
*Securitized deals usually have specific language around flood insurance because flood insurance is often not covered by an “all risk” policy.
Sources: Deutsche Bank, Federal Reserve Bank of St. Louis, Bloomberg.
1Non-qualified mortgages are non-standard mortgages for borrowers that do not meet requirements of typical qualified mortgages, i.e., alternative income documentation, higher debt limits, higher down payments, etc.
2SASB — Single asset, single borrower. CRE CLO — Commercial real estate collateralized loan obligation.
Bonds rated AAA, AA, A and BBB are considered investment grade.
ICE BofA CMBS Fixed Rate AAA 7-10 Year Index measures the performance of US dollar denominated AAA-rated commercial mortgage-backed securities with a remaining term to maturity of greater than or equal to 7 years and less than 10 years in the US domestic market. ICE BofA Single-A US Corporate Index measures the performance of US dollar denominated A-rated corporate debt publicly issued in the US domestic market. S&P/Case-Shiller US National Home Price Index measures changes in the total value of all existing single-family housing stock.
See diamond-hill.com/disclosures for a full copy of the disclaimer.
The views expressed are those of Diamond Hill as of September 2023 and are subject to change without notice. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. Investing involves risk, including the possible loss of principal. Past performance is not a guarantee of future results.
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