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Fitch Sees Better-Than-Expected Performance of Auto Loans

October 27, 2009

The ratings for prime senior tranches of asset-backed securities (ABS) auto loan and credit card transactions have remained stable in the first nine months of the year, despite concerns by Fitch Ratings about growing problems in consumer credit and unemployment.

In its Term ABS Credit Action Report for September, the ratings firm said liquidity conditions have stabilized and term ABS proved resistant to the severe credit and ratings adjustments found in other sectors.

For the first nine months of the year, Fitch affirmed 16 auto loans and 16 auto leases. In September, Fitch issued four upgrades in the auto lease sector and 10 upgrades in the auto loan sector.

In the auto lease segment, Fitch upgraded four classes of Capital Auto Receivables 2006-SN1 and 2006-SND1A last month, reflecting “better than expected performance within the pools and significant improvement in vehicle auction values in more recent months.”

“Due to the increased levels of credit enhancement, the upgraded classes were able to withstand significantly higher base and stress case residual loss assumptions, consistent with the ‘AAA’ ratings,” Fitch added.

In the auto loan segment, Fitch upgraded nine and affirmed six classes from the Bank of America Auto Trust 2008-1 transactions. The ratings firm said the upgrades are a result of continued available credit enhancement, and the collateral’s continued performance within Fitch’s expectations.

“Currently, under the credit enhancement structure, the securities can withstand stress scenarios consistent with the upgraded rating categories and still make full payments of interest and principal in accordance with the terms of the documents,” Fitch said.

The ratings firm also upgraded one class and affirmed one class from the Wachovia Auto Owner Trust 2006-A transaction.

“The upgrade reflects the continued stabilization of cumulative net loss performance and the building credit enhancement in the transaction,” Fitch said.

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