October remittance reports showed moderately improved credit performance across securitized solar loan pools during the September collection period. Annualized net losses in KBRA’s Solar Loan Index improved 8 basis points (bps) month-over-month (MoM) but increased 55 bps year-over-year (YoY), landing at 1.77% (see Figure 1). Meanwhile, early- (30-59 days) and late-stage (60-119 days) delinquencies came in at 0.58% and 0.56%, respectively, fluctuating less than 2 bps (+/-) MoM, but rising 15 bps and 21 bps YoY, respectively. Prepayment rates (CPR) fell 137 bps MoM and 260 bps YoY to 4.58%, reaching their lowest level since we began tracking the measure in 2017 (see Figure 3). Due to the comparatively low interest rates on most solar loans versus the note coupons of solar ABS transactions, a slower prepayment rate increases the amount of cumulative negative excess spread over the life of the transaction, which erodes hard credit enhancement and increases risk, all else being equal.
Given…