December remittance reports showed mostly weaker credit performance across securitized solar loan pools during the November collection period. Annualized net losses in KBRA’s Solar Loan Index climbed 35 basis points (bps) month-over-month (MoM) and 72 bps year-over-year (YoY) to 1.91% (see Figure 1). Meanwhile, early-stage delinquencies (30-59 days) fell 2 bps MoM but ticked up 5 bps YoY to 0.58%, while the percentage of borrowers in late-stage delinquency (60-119 days) increased 5 bps MoM and 19 bps YoY to 0.61% (see Figure 2). Finally, solar loan prepayment rates declined 21 bps MoM and 87 bps YoY to 4.68%, remaining at historically low levels (see Figure 3).
Solar loan credit performance may see continued pressure in 2024 amid weaker consumer credit fundamentals and the resumption of student loan payments, which began in October 2023. Prepayment speeds should remain near historically low levels, given the slowdown in home sales, high refinancing costs, and the lower interest rates…