Subprime Auto-Loan Delinquencies, After April Fiasco, Miraculously Healed by "Forbearance" & Stimulu

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Subprime Auto-Loan Delinquencies, After April Fiasco, Miraculously Healed by “Forbearance” & Stimulus Money
by Wolf Richter • Jul 13, 2020 •

“Extend and pretend” works wonders for a little while. But with auto loans, it gets dicey in a hurry. And then what?
By Wolf Richter for WOLF STREET.


Nearly all current or former taxpayers below certain income levels received the $1,200 stimulus payment. For a couple, it came to $2,400. If they had kids, more money was added. These moneys arrived in bank accounts in April, May, and June. In addition, there are currently over 32 million people who claim unemployment benefits under state and federal programs. They not only get their regular unemployment benefits but also the extra $600 a week in federal funds. For many laid-off workers, this adds up to more than their wages. This money has been a godsend to people who were behind on their subprime-rated auto loans.

And there was another godsend: “Extend and Pretend.”

Many lenders entered into forbearance agreements with borrowers who couldn’t pay. Much of the publicity about forbearance has been on mortgages, but this also happened with credit card loans and auto loans.

Forbearance means that the lender agrees not to pursue its legal rights to deal with a defaulted loan. With auto loans in forbearance, the lender agrees not to repossess the vehicle as long as the borrower sticks to the terms of the forbearance agreement.

Forbearance means delay in payments – the interest is normally added to the outstanding balance that is to be dealt with later. ..............(more)

https://wolfstreet.com/2020/07/13/subprime-auto-loan-delinquencies-after-april-fiasco-miraculously-cured-by-forbearance-stimulus-money/