An already disastrous year for the subprime auto lending industry ended on a ominous note as Moody's Investors Service reported a sharp rise in loan losses in some of the sector's better portfolios.

"Most of chargeoff increases we've seen before have been due to companies digging deeper into the credit spectrum," said Moody's analyst Richard Cantor. "But what we're seeing now is rising losses in pools of loans that have had good payment histories."

Industrywide loan losses between April and October rose 11.4% higher than Moody's had projected, with a third of the deterioration occurring in October.

Mr. Cantor said the rise in subprime auto loan chargeoffs signaled that an economic slowdown was causing already-distressed consumers to fall further behind on their bills, or that the subprime auto lenders had underestimated the risk in their sector.

The Moody's report capped a terrible year for an industry that makes car loans to people with bad credit. Numerous companies missed earnings estimates, fired top executives, engaged in questionable accounting, or filed for bankruptcy. For investors who have decided to ride out the crisis, Moody's report indicates things may get worse before they get better.

Scott Calahan, president of Boston Portfolio Advisors, Fort Lauderdale, Fla., said subprime auto loans made in the past year or two do worse than those made before Wall Street became infatuated with the business and took more than two dozen companies public.

"The pools we were looking at back in 1991 or '92 behaved differently," said Mr. Calahan, whose firm does research and due diligence on subprime auto lenders. "Back then you would experience 75% of your losses within 18 months and then losses would be minimal. I wouldn't say they were 'A' paper, but they were a fraction of what we see now. There's been a change in something."

Analysts speculate that the change may be due to the diminishing stigma of consumer bankruptcy. Fitch IBCA estimates that 1.3 million people filed for bankruptcy in 1997, 18% more than 1996's record number.

But analysts also observe that subprime auto lenders compete fiercely for business and have offered credit to people who in 1991 would probably not have been eligible. Few companies have figured out how to maintain underwriting standards without compromising the loan origination numbers they needed in the past to demonstrate growth to Wall Street.

Then too, the rise in chargeoffs may be a sign that the poorer segments of society are feeling the first pangs of an economic slowdown. "You could be seeing the beginning of a recession for these borrowers," Mr. Calahan said.

Regardless of the cause, Moody's said, few subprime auto lenders have been spared rising losses.

"The increase in loss rates was widespread, reflecting higher chargeoffs on pools with both lower-than-average and higher-than-average expected losses," Moody's reported.

The losses have been most severe at ACC Consumer Finance Corp., a San Diego-based lender that in October was acquired by Household International Inc. for $200 million in stock and cash. From April to October the company's loss rates in pools of securitized subprime auto loans increased 19.9% higher than Moody's projections.

Chevy Chase Savings Bank, a privately held thrift based in the Washington suburbs, experienced a 16.4% higher-than-expected increase in loan losses over the same six months.

And KeyCorp's AutoFinance Group followed with chargeoffs 13.2% higher than Moody's projected.

Two independent companies performed the best, according to Moody's, which said that Americredit Corp. of Fort Worth and Onyx Acceptance Corp. of Irvine, Calif., "significantly outperformed" the ratings agency's loss- rate index. The performance of these two companies "is evidence of consistent underwriting standards over the past two years," Moody's said.

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