Securitization in Focus — December 2025
Asset-backed securities
Auto sales and lending: 2026 outlook
Cox Automotive’s 2026 Auto Industry Outlook points to a less optimistic backdrop, with new vehicle sales projected to fall 2.4% year over year to 15.8 million units.
Headwinds to watch:
- Inflation and Fed uncertainty. Inflation has cooled but remains above the Fed’s 2% target. Potential changes at the Fed add uncertainty that can weigh on big ticket purchases such as autos.
- Bifurcation persists. Since 2019, new car sales among households earning $75k or less are down 30%, and sales among households earning $75k–$150k are down 7%. Orders from households earning $150k+ are up 45% over the same period.
- Higher prices, longer terms. The average new vehicle price eclipsed $50,000 this fall (≈ $38,000 pre pandemic, per Kelley Blue Book). JD Power estimates the average monthly payment at ~$760. In Q3, 33% of buyers took loans beyond six years; loans with 85–96 months to maturity reached ~2% of buyers through October. Longer terms reduce monthly payments but materially increase total interest paid.
Payment and Interest Impact by Loan Term
|
5Y |
7Y |
8Y |
| Average cost of new car |
$50,000 |
$50,000 |
$50,000 |
| Interest rate |
5% |
5% |
5% |
| Monthly payment |
$943.56 |
$706.70 |
$633.00 |
| Total Interest paid |
$6,613.70 |
$9,362.42 |
$10,650.72 |
Investor takeaways — auto
As issuance in auto asset-backed securities (ABS) grows, emphasize underlying collateral, borrower profiles, credit enhancement and capital stack positioning.
Commercial mortgage-backed securities
In the news — single family rental (SFR) policy watch
The administration announced an effort to ban large institutional investors from purchasing additional single family homes. SFR represented ~3.5% of 2025 non-agency commercial mortgage backed securities (CMBS) issuance.
Key market structure questions:
- Will existing portfolios be grandfathered?
- Could taxes or added costs incentivize sales or reduce profitability?
- Can institutions continue to develop homes or buy from homebuilders?
- If sales were required, over what timeframe?
The SFR industry is dominated by small owners: per Invitation Homes, 77% of SFRs are owned by 1–9 home investors, 17% by those with 10–99 homes and only ~6% by 100+ home owners.
Further detail is expected at Davos in late January 2026.
CMBS Issuance ($B)
2025 delivered the strongest issuance in years as easing financial conditions stabilized the market, though financing costs remain above pre pandemic levels. Extended assets should benefit; weaker assets may face fundamental pressure.
CMBS trends in December
Overall CMBS delinquency: 7.30% in December (~+4 bps month over month).
30+ Day Delinquencies (%)
Seriously delinquent (60+ days, foreclosure, real estate owned or non performing): 7.00%, unchanged.
Segment moves:
- Lodging: +44 bps to 6.61%
- Retail: 6.74% → 6.92%
- Industrial: +13 bps to 0.80%
- Multifamily: −34 bps (second straight monthly decline)
- Office: down from the 11.76% peak to 11.31%, still ~0.30%, 5.49% and 9.73% above the prior three year end levels
Trend check: 30+ day delinquency was 6.57% a year ago, dipped to 6.30% in February 2025, then oscillated into year end.
Residential mortgage-backed securities
Issuance
Non-agency residential mortgage backed securities (RMBS) issuance totaled $194 billion in 2025, nearly matching the combined $207 billion issued in 2023 and 2024. Non-qualified mortgages (Non-QM) — which do not meet Consumer Financial Protection Bureau guidelines and allow more flexible eligibility and documentation — led with $75 billion, nearly double 2024’s $41.8 billion. The “other” category, including home equity loans/lines and reverse mortgages, reached $50.2 billion, roughly 65% above 2024 and 308% above 2023. Activity slowed seasonally in December as markets wound down for the holidays, with final deals pricing in the days before Christmas.
Non-Agency RMBS Issuance ($B)
2025 Non-Agency RMBS Issuance (%)
Sources: Cox Automotive, JD Power, Kelley Blue Book, Deutsche Bank, Barclays, Trepp.
Index data source: Bloomberg Index Services Limited. See diamond-hill.com/disclosures for a full copy of the disclaimer.
The views expressed are those of Diamond Hill as of January 2026 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.