easy · Asset-Backed Securities
In the 'Cumulative Loss Timing Curve' for auto loans, losses are typically 'front-loaded.'
What does this mean for a 2026-1 vintage deal in its second year?
- Rating agencies will only assign a rating to the deal if cumulative net losses remain at exactly zero through month 36.
- The highest rate of defaults is expected to occur relatively early (e.g., months 12 to 24) rather than late in the deal's life.
- The deal will post zero cumulative losses through its first two years, with defaults concentrated at final maturity.
- The servicer is contractually permitted to front-load its fee income, collecting half of the deal's total servicing fees within Year 1.
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