Auto loans next mortgage-crisis victim?

first_img AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREStriving toward a more perfect me: Doug McIntyre Subprime mortgages are home loans to borrowers with tainted credit histories. Such loans caused credit markets to seize up in August on concerns about plunging home prices and missed mortgage payments. Nearly 2.3million subprime mortgages are projected to reset at higher rates, and correspondingly higher monthly payments, through the end of next year. Many fear that those loans will result in foreclosures that will drag down property values. With the housing market continuing to sink, investors are bracing for more write-downs at financial institutions, which have already written down tens of billions of dollars this year. This month, major banks including Citigroup Inc., Merrill Lynch & Co and Morgan Stanley have revealed massive losses on investments linked to the U.S. mortgage market. John Casesa, managing partner for the Casesa Shapiro Group, an auto-industry financial-advisory firm, said there’s no question the mortgage woes will spill into car and truck financing. “The only question is how big a worry it is,” he said. If the spillover continues, it could further drive down auto sales, Casesa said, because as adjustable-rate mortgages go higher, there will be less liquidity available to buy cars and other big-ticket items. Loan delinquencies could also result in tighter credit by the auto companies’ financial units, Johnson wrote.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! DETROIT – Rising delinquency rates on car and truck loans have some industry analysts concerned that subprime-mortgage troubles could spill into the automotive-finance business. In a note to investors Monday, Lehman Brothers analyst Brian Johnson said his analysis of auto-loan-backed securities sold by Ford Motor Credit Co. and GMAC Financial Services showed some higher delinquency rates for October and September compared with recent years. “As unemployment remains low, this deterioration in the auto ABS credit conditions may be evidence of a likely spill over of the mortgage woes onto the auto credit world,” Johnson wrote. Spokeswomen for both Ford Motor Credit and GMAC said they experienced slight increases in delinquencies in the third quarter, but those were unrelated to the subprime-mortgage problems. last_img read more