The surge in delinquencies and foreclosures in the subprime mortgage market may be seeping into low-end car loans, Standard & Poor's reports. "For the subprime sector, 60-plus-day delinquencies (on 2005 loans) once again moved above the levels seen in the 2003 and 2004 vintages after a steady five-month increase," S&P said. A slight uptick in delinquencies among subprime car loans suggests that subprime mortgage holders, unable to make their house payments as their adjustable-rate mortgages are reset upward, are also having trouble making their car payments. Car loan delinquencies might also be exacerbated by the relaxation of credit standards by some subprime auto lenders, like Capital One Financial. Still, the impact of the subprime mortgage crisis on car loans will likely be contained, since most subprime auto borrowers are renters, not homeowners. High-quality car loans, like their housing equivalents, continue to do well.
Commentary: Rise in Sub-Prime Defaults Leave Investors Asking Who's Next • How the Sub-Prime Mortgage Crisis Could Spread • Detroit Homes Selling For Less Than SUVs: A Housing Bust Metaphor
Stocks/ETFs to watch: Capital One Financial Corp. (COF), American Express Company (AXP), Bank of America Corp. (BAC)
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