June remittance reports showed stable credit performance across securitized solar loan pools during the May collection period. Annualized net losses in KBRA’s Solar Loan Index came in at 2.05%, down 8 basis points (bps) month-over-month (MoM) but up 108 bps year-over-year (YoY) (see Figure 1). Meanwhile, early- (30-59 days) and late-stage (60-119) delinquencies landed at 0.51% and 0.49%, respectively, changing less than 2 bps (+/-) MoM but up 13 bps and 17 bps YoY (see Figure 2).
Solar loan prepayment rates (CPR) remained at depressed levels, climbing 117 bps MoM but falling 351 bps YoY to 6.63% (see Figure 3). Against a backdrop of weakening consumer credit fundamentals, slowing home sales, and an expectation for further Federal Reserve rate increases, we expect solar loan prepayment rates to linger near historically low levels through the remainder of 2023.
Although solar loan credit performance will likely soften through the rest of the year due to inflation, higher rates, and the…