KBRA Releases Research – Consumer ABS: Implications of Early State Unemployment Opt-Outs

Kroll Bond Rating Agency (KBRA) releases research on the implications of early state unemployment opt-outs on consumer ABS credit.

Key Takeaways

• While the impact of early state opt-outs on consumer ABS credit performance is difficult to gauge, we are not of the view that it will meaningfully affect consumer ABS credit given consumer balance sheet strength, the expectation for higher employment, and rising wages.
• The non-prime auto loan ABS shelves that provide monthly asset level disclosures have relatively high exposure to opt-out states, while ABS issuers in the unsecured consumer loan and prime auto sectors are more nationally diversified and have less exposure.
• World Omni’s non-prime (WOSAT) and prime (WOART) auto loan ABS shelves are the most heavily exposed, with 89% and 82%, respectively, of their outstanding securitized loans originated in the 26 states that have announced plans to opt out of some or all of the federal unemployment benefit programs However, delinquency rates for both shelves are below pre-COVID levels, providing room for performance to normalize.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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