Wednesday, January 11, 2017

OCC: Auto Lending Risk Is Increasing

The Office of the Comptroller of the Currency (OCC) in its Semiannual Risk Perspective for Fall 2016 noted that auto lending risk has been increasing for several quarters.

This report should be of interest to credit unions as auto lending remains an important line of business for most credit unions.

The OCC wrote that underwriting standards for direct and indirect auto loans for some lenders were less stringent due to increased competition for auto loans.

In addition, OCC commented that they are seeing increased risk layering at lenders as they grant loans with longer terms combined with higher advance rates resulting in higher loan-to-value ratios.

Moreover, lenders are seeing higher loss severities (lower recoveries) associated with charged off auto loans.

It would be interesting to hear from the National Credit Union Administration as to what it is seeing with respect to auto lending risk at credit unions.

Read the report.

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