Fitch: 1H'08 U.S. Auto ABS Performance Down Year-over-Year; Rating Volatility to...

Fitch: 1H'08 U.S. Auto ABS Performance Down Year-over-Year; Rating Volatility to Increase

NEW YORK--(Business Wire)--
Declining asset performance in U.S. prime auto-loan asset-backed
securities (ABS) has done little thus far to adversely affect ratings
performance, though that figures to change during the second half of
this year, according to Fitch Ratings.

Asset performance in prime U.S. auto-loan asset-backed securities
(ABS) deteriorated on a year-over-year basis during first half-2008 as
annualized net losses increased by 88%. Ratings on prime auto loan
transactions, however, remained stable during the period as excess
spread was sufficient to absorb elevated loss levels. Mounting
economic pressures and declining used car values are likely to
contribute to an increase in negative rating actions in the second
half of 2008.

Fitch's prime ANL index hit 1.24% in June, 9% higher than in May.
ANL rates in 2008 have come off the record low levels exhibited in the
two years prior to 2008 and, so far, are consistent with loss rates
produced in 2002-2005.

Fitch's 60+ days delinquency index rose to 0.62% in June, an 8.8%
increase over May. Year-over-year, the index was 29% higher in June
versus a year-ago. Delinquency levels are following seasonal patterns
but through June were well above levels produced during similar
periods over the past six years.

In the subprime sector, 60+ days delinquencies rose 7% in June
over May to 3.28%. The index was 34% higher in June when compared to
June 2007. Subprime ANL rose 3% in June to 5.63%, versus May, and were
44% above the level produced in June 2007. June's ANL rate remained
above levels exhibited during the 2005-2007; however, losses still
remain within range or below performance seen during 2002-2004.

While negative rating actions have been limited in the first half,
positive rating actions have slowed as asset performance declined.
Fitch upgraded only 14 tranches of prime auto ABS transactions in the
first six months of 2008, versus 61 during the same period in 2007.

Despite this fact, most prime transactions continue to build
credit enhancement providing adequate loss coverage for the most
senior tranches of bonds. Subordinate tranches, particularly of those
transactions issued in late 2006 and all of 2007 with high SUV and
truck concentrations, remain at elevated risk.

The outlook on asset performance remains negative for the
remainder of 2008. Factors that will impact auto ABS performance in
the latter part of the year include a softening U.S. economy;
declining consumer demographics; loan structural features including
the increased origination of longer term loans and higher
loan-to-values that drive loss severity; and a deteriorating wholesale
vehicle market with severe declines in the truck and sports utility
vehicle (SUV) segments in recent months.

Fitch's indexes track the performance of $62.3 billion of auto
ABS, of which 66% comprises prime auto ABS and the remaining 34%
subprime auto ABS.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Hylton Heard, +1-212-908-0214
John Bella, Jr., +1-212-908-0243
Sandro Scenga, +1-212-908-0278 (Media Relations)

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