The same economic factors that have choked dealer credit for the past year also have frozen an increasingly important source of auto credit: asset-backed securities.
Issuance of the securities plunged in September 2008 and virtually stopped the month after. The entire year proved to be the worst for auto-related issuances in more than a decade.
But now there appear to be signs of a thaw, thanks to the Federal Reserve Bank of New York's TALF, or Term Asset-Backed Securities Loan Facility. Since March the Fed has been making dozens of loans to holders of some AAA-rated asset-backed securities, including Bank of America, Ford Motor Credit Co. and the United Services Automobile Association, or USAA.
"The story of 2009 was pretty strong, and TALF was definitely a success from an issuer standpoint," said John Bella, a Fitch Ratings managing director.
Asset-backed securities, which are bundled pools of auto loans to consumers and dealers, are sold by lenders on bond markets to pension funds, insurers, mutual funds and endowments. In recent years, proceeds from the sale of the securities had come to supply most credit extended by domestic captive finance companies, analysts said.