Securitized solar loan performance improved modestly month-over-month (MoM) for the January remittance report period. Solar loan annualized net losses were relatively unchanged, falling 2 basis points (bps) month-over-month (MoM), while early-stage delinquencies (30-59 days) and late-stage delinquencies (60-120 days) increased 2 bps and 4 bps MoM, respectively (see Figure 1). However, annualized net losses and late-stage delinquencies are up 49 bps and 17 bps year-over-year (YoY) (see Figure 2). Prepayment speeds were relatively flat, increasing 16 bps MoM, but falling 18 bps YoY (see Figure 3).
With prepayment speeds near historical lows and generally low interest rates on solar loans, we note that securitizations with negative excess spread1 could experience higher risk, given a prolonged period of low prepayment rates. For these securitizations, higher prepayment speeds ameliorate the impact of negative excess spread as the term on solar loans…