Browse
Log in / Register
Share
April 11, 2025 – Oregon Community Credit Union (OCCU) is moving forward with a new auto loan securitization, tapping the asset-backed market for $307.3 million. The transaction, named OCCU Auto Receivables Trust 2026-1, will issue notes across seven tranches, ranging from senior Class A to subordinated Class D.
This marks OCCU's latest foray into the securitization space, coming at a time when credit unions are increasingly leveraging ABS to manage liquidity and fund loan growth. The deal comes with credit enhancement levels that are notably lower than the credit union's previous offering, signaling a shift in how the structure is built to protect investors.
According to ratings agency KBRA, the senior Class A notes — divided into four tranches (A1, A2, A3, A4) — all share the same initial credit enhancement level of 17.75%. That's a steep drop from the 23.00% level seen in OCCU's prior deal. The subordinated notes also saw reductions: Class B notes now carry 17.35% (vs. 23.00% previously), Class C at 12.15%, and Class D at 7.05%. The earlier deal had Class B, C, and D at 17.35%, 12.15%, and 7.05% respectively — but notably, those levels were for the prior deal's structure, and the new deal's Class A enhancement is lower.
KBRA notes that the sequential repayment structure means the A1 notes will receive principal payments first, followed by the A2, A3, A4, and then the subordinate notes. This waterfall ensures that the senior tranches are paid down before the riskier classes receive any principal, which is a common feature in auto ABS.
Beyond subordination, the deal includes overcollateralization (OC) with a target of 5.85%, a cash reserve account funded to about 0.50% of the pool balance, and excess spread representing 1.13% of the note balance. These features are designed to absorb losses before they reach the noteholders. The OC target is in line with typical credit union auto loan deals, though the reserve account size is relatively modest.
The underlying loan pool is split — 53.01% of the loans are backed by used vehicles, while the remainder are new cars. The average loan balance sits at $34,185, with a weighted average APR of 7.54%. The average loan-to-value (LTV) ratio is a high 98.30%, indicating that borrowers have minimal equity in their vehicles. The original loan term is 80 months, which is longer than typical 60-72 month terms, potentially increasing the risk of negative equity over time.
Geographically, the pool is heavily concentrated in the Pacific Northwest. Oregon accounts for 45.16% of the loans, followed by Washington at 32.67% and California at 11.63%. That's over 89% of the pool tied to three states, which could be a concern if regional economic conditions deteriorate.
KBRA assigned ratings as follows: K1+ to the A1 notes, AAA to the A2 through A4 notes, and AA-, A-, and BBB to the Class B, C, and D notes respectively. These ratings reflect the credit enhancement and structural protections, though the lower CE levels compared to the prior deal may raise eyebrows among some investors.
This deal comes as auto loan ABS issuance remains strong, but credit conditions are tightening. With elevated interest rates and rising vehicle prices, borrowers are taking on longer loan terms, leading to higher LTV ratios. OCCU's 98.30% average LTV is above the industry average for credit unions, but the credit union's strong membership base in the Northwest may help mitigate risk. The reduced credit enhancement from the prior deal suggests that OCCU and its underwriters are confident in the pool's performance, or that they are adjusting to current market spreads.
Investors will be watching the performance of the loans closely, especially given the high LTV and long terms. The deal is expected to price within the next few days, with KBRA's ratings providing a benchmark for yield expectations.
