http://www.bloomberg.com/news/articles/2016-02-11/some-hedge-funds-want-to-make-subprime-auto-loans-next-big-short
For investors who see more risks building in auto securities, shorting the bonds is a tempting proposition. Outstanding auto loans grew by nearly 50 percent between 2010 and December 2015, the last period for which the data are available, and now stand at more than $1 trillion. Rapid growth can signal that lenders have not been paying enough attention to risks, as was the case during the housing boom last decade. There were about $170 billion of bonds backed by auto debt outstanding as of the end of last year, up more than 45 percent from 2010, but below pre-crisis highs.
New risks are also emerging that weren’t seen in the last lending cycle. Those includelonger loan repayment terms, ballooning loan amounts and more willingness to finance used cars.
More car debt is going bad, at least judging by loans that are bundled up into bonds and sold to investors. Net losses on securitized subprime loans rose to 7.5 percent in November, marking the highest level since 2010, Standard & Poor’s data show. Many of those delinquencies are coming from newer subprime lenders that are less heavily regulated than banks.
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