{"id":27994,"date":"2017-11-15T07:48:03","date_gmt":"2017-11-15T12:48:03","guid":{"rendered":"http:\/\/olduvai.ca\/?p=27994"},"modified":"2017-11-15T07:48:03","modified_gmt":"2017-11-15T12:48:03","slug":"auto-loan-subprime-blows-up-lehman-moment-like","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=27994","title":{"rendered":"Auto-Loan Subprime Blows Up Lehman-Moment-Like"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2017\/11\/14\/auto-loan-subprime-blows-up-lehman-moment-like\/\">Auto-Loan Subprime Blows Up Lehman-Moment-Like<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>But there is no Financial Crisis. These are the boom times.<\/strong><\/p>\n<p>Given Americans\u2019 ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. If the word \u201csurged\u201d appears a lot, it\u2019s because that\u2019s the kind of debt environment we now have:<\/p>\n<ul>\n<li>Mortgage debt surged 4.2% year-over-year, to $9.19 trillion, still shy of the all-time record of $10 trillion in 2008 before it all collapsed.<\/li>\n<li>Student loans surged by 6.25% year-over-year to a record of $1.36 trillion.<\/li>\n<li>Credit card debt surged 8% to $810 billion.<\/li>\n<li>\u201cOther\u201d surged 5.4% to $390 billion.<\/li>\n<li>And auto loans surged 6.1% to a record $1.21 trillion.<\/li>\n<\/ul>\n<p>And given how the US economy depends on consumer borrowing for life support, that\u2019s all good.<\/p>\n<p>However, there are some big ugly flies in that ointment: Delinquencies \u2013 not everywhere, but in credit cards, and particularly in subprime auto loans, where serious delinquencies have reached Lehman Moment proportions.<\/p>\n<p>Of the $1.2 trillion in auto loans outstanding, $282 billion (24%) were granted to borrowers with a subprime credit score (below 620).<\/p>\n<p><ins class=\"adsbygoogle adsbygoogle_responsive\" data-ad-client=\"ca-pub-8212587530282873\" data-ad-slot=\"1767955946\" data-adsbygoogle-status=\"done\"><ins id=\"aswift_5_expand\"><ins id=\"aswift_5_anchor\"><\/ins><\/ins><\/ins>Of all auto loans outstanding, 2.4% were 90+ days (\u201cseriously\u201d) delinquent, up from 2.3% in the prior quarter. But delinquencies are concentrated in the subprime segment \u2013 that $282 billion \u2013 and all hell is breaking lose there.<\/p>\n<p>Subprime auto lending has attracted specialty lenders, such as Santander Consumer USA. They feel they can handle the risks, and they off-loaded some of the risks to investors via subprime auto-loan-backed securities. They want to cash in on the fat profits often obtained in subprime lending via extraordinarily high interest rates.<\/p>\n<p>Subprime borrowers are perceived as sitting ducks. They\u2019ve been turned down, and they\u2019re aware of their bad credit, and they often think they have no other options. And so they often end up with ludicrously high interest rates on their loans, which these borrowers, because of the ludicrously high interest rates, have trouble servicing.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Auto-Loan Subprime Blows Up Lehman-Moment-Like But there is no Financial Crisis. These are the boom times. Given Americans\u2019 ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[3891,195,312,7785,2564,827,4254,4255],"class_list":["post-27994","post","type-post","status-publish","format-standard","hentry","category-economics","tag-auto-loans","tag-debt","tag-financial-crisis","tag-loan-delinquency","tag-subprime-loans","tag-united-states","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27994"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27994\/revisions"}],"predecessor-version":[{"id":27995,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27994\/revisions\/27995"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}