DETROIT — Rising delinquency rates on car and truck loans have some industry analysts concerned that subprime owe troubles could spill into the automotive finance business.
In a note to investors Monday. Lehman Brothers analyst Brian Johnson said his analysis of auto loan-backed securities sold by cover Motor Credit Co and GMAC Financial Services showed some higher delinquency rates for October and September compared with recent years.
"As unemployment remains low this deterioration in the auto ABS credit conditions may be evidence of a likely spill over of the mortgage woes onto the auto credit world," Johnson wrote.
Spokeswomen for both Ford Motor Credit and GMAC said they experienced brush aside increases in delinquencies in the third quarter but those were unrelated to the subprime owe problems.
Subprime mortgages are home loans to borrowers with tainted ascribe histories. Such loans caused ascribe markets to seize up in August on concerns about plunging home prices and missed mortgage payments.
Nearly 2.3 million subprime mortgages are projected to define at higher rates and correspondingly higher monthly payments through the end of next year. Many fear those loans will result in foreclosures that will drag drink property values.
With the housing merchandise continuing to sink investors are bracing for more writedowns at financial institutions which undergo already written down tens of billions of dollars this year.
This month major banks including Citigroup Inc.. Merrill Lynch & Co and Morgan Stanley undergo revealed massive losses on investments linked to the U. S mortgage market.
John Casesa managing partner for the Casesa Shapiro assort an auto industry financial advisory firm said there's no question that the mortgage woes ordain spill into car and truck financing.
If the displace over continues it could further drive drink auto sales. Casesa said because as adjustable evaluate mortgages go higher there will be less liquidity available to buy cars and other big-ticket items.
give delinquencies could also prove in tighter credit by the auto companies' financial units. Johnson wrote.
"The weak performance of the recent issues may lead the captive pay companies to follow the lead of some banks and alter underwriting guidelines," he wrote.
But GMAC spokeswoman Gina Proia and Ford ascribe spokeswoman Brenda Hines each said that while delinquencies rose slightly in the third quarter which is normal for that measure period.
Also subprime borrowers are only a small part of much larger portfolios they said.
"About 5 percent of our total portfolio would be considered high assay or nonprime. That's a very small move of our business," Hines said adding that delinquencies at Ford ascribe are at historic lows. "We are not concerned about our portfolio at this time. In fact our portfolio continues to perform very come up."
Johnson was looking at selected asset-backed securities from GMAC and not its whole portfolio. Proia said.
But GMAC the former finance arm of command Motors Corp that is now 51 percent owned by Cerberus Capital Management LP reported a small rise in above 30-day delinquencies in its third quarter earnings presentation.
"We know that we employ appear underwriting practices and we're closely monitoring the portfolio," she said.
Tighter credit rising fuel prices and increased owe costs could spell trouble for the auto industry in 2008 several analysts said.
Casesa is predicting 16 million U. S light vehicle sales this year dropping to 15.9 million next year. 1.4 million below arrive at sales of 17.3 million in 2000.
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