Cash For Clunkers – Taxpayers Will Pay Again
The Cash for Clunkers program that resulted in a temporary surge in automobile sales in the recent months has created a nasty side effect - more delinquent payments.
Higher credit risk buyers who used the government’s cash-for-clunkers program last year to buy a new car had higher repossession and late payment rates than those who didn’t use the program, a research firm finds.[…]
Those motorists also had higher levels of buyers’ remorse, says the firm, CNW Research.
A mid-January analysis of those who purchased a new vehicle under the cash-for-clunkers program found the most dramatic differences among those in the lowest credit category:
Among subprime credit borrowers, those who used the clunkers program had a 4.8% repo rate, more than double the 2.2% who bought similar vehicles but didn’t use the government incentives.
Cash for clunkers was Congress’ and the Obama administration’s effort to spur the economy last year by offering up to $4,500 in incentives for buying a new fuel-efficient car. CNW adds that it isn’t as clear whether those in better credit categories also have higher repo or late payment records.
As for buyers’ remorse, almost 1 in 5 clunkers program participants
who took part in a survey this month said they regret buying a new vehicle under the program. Among those who didn’t use the program, the regret rate was slightly more than 1 in 20.As a result, perhaps it’s no surprise that more subprime customers who took part in the program tend to be late with payments than those who did not. Many had expected the economy to rebound by now.
"Faced with a new monthly payment of $250 to $350 per month, many of the (clunkers program) users admit they didn’t think past the new car smell," CNW says in its January newsletter. "Most, however, anticipated the economy improving substantially between last July and today and felt that improvement would give them the financial boost necessary to at least offset some of the additional monthly payment." (USA Today)
Not only did the tax payers have to pay for the Cash for Clunkers program, but now the tax payers will be on the hook once again to back stop the additional losses that will be coming as a result of the failed program.
Capmark Investments Enters Chapter 11 and New Loan Delinquency Projections
Another one bites the dust… Capmark Investments LP files Chapter 11 bankruptcy, and updated commercial loan delinquency projections…
NEW YORK, Jan 15 (Reuters) – Capmark Investments LP, which said it manages more than $1.7 billion of equity real estate and mortgage-related investments, filed for bankruptcy protection on Friday, less than three months after its parent, Capmark Financial Group [CPFNG.UL], made its own filing.
The partnership once known as GMAC Institutional Advisors has more than $1 billion of assets and liabilities, according to its Chapter 11 petition filed with the U.S. bankruptcy court in Wilmington, Delaware.
Capmark Investments said it hired Lazard Freres & Co as its investment banker and financial adviser for the bankruptcy process. A spokesman for the partnership declined to comment.
Capmark Financial, a commercial real estate company, had sought protection from creditors on Oct. 25, wiping out the investments of several private equity firms including Kohlberg Kravis Roberts & Co [KKR.UL].
The company cited deteriorated financial and real estate market conditions and a lack of available capital for its filing, in which it reported $20.1 billion of assets and $21 billion of liabilities.[…] Source: Reuters
And while we are on the topic of mortgage related investments, take a look at the latest projections on commercial loan delinquencies issued today:
Moody’s: US CMBS loan delinquencies rise to 4.9%; 8%-9% rate expected by end of 2010.
Delinquencies on US CMBS loans in conduit/fusion deals ended 2009 at 4.9%, as measured by the Moody’s Delinquency Tracker (DQT). They began 2009 at 0.95% and therefore have increased five-fold during the year.
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