ABS: Auto Loan ABS Global Rating Methodology

Introduction

This document describes the Kroll Bond Rating Agency, LLC and its rating affiliates’ (collectively, “KBRA”) rating methodology for prime and subprime auto loan asset-backed securities (ABS). KBRA’s rating of an auto loan ABS transaction addresses the quality and expected performance of the underlying collateral; the originator and servicer’s business model and operational strength; and the transaction terms, including the capital structure, credit enhancement, and legal structure.

The KBRA auto loan ABS process includes an operational assessment of the originator and servicer, the results of which are considered in our rating analysis. The latter is performed on the underlying collateral pool as well as the originator’s historical static pool data, which is typically segmented by characteristics including credit quality and product type. The process also includes a review of the legal structure, transaction documents, and legal opinions when determining the credit strength…