Auto finance

Overview

Our Finance team is led by experts with years of experience dealing with auto finance economic and financial issues. Our experience includes creating an entry strategy for a major financial institution into the auto finance sector, developing custom credit scoring models and risk-based pricing algorithms, and implementing auto finance direct marketing strategies. Additionally, as testifying experts, we have provided litigation support to clients, including trial and deposition testimony; expert reports on the credit quality of a company’s securitizations and loan portfolio; industry structure; credit loss; and cash flows forecasts.

  • Developed expert report for litigation on behalf of a prime auto finance company. Report analyzed company’s origination strategy, credit characteristics, and loss performance relative to comparable benchmarks of similar portfolios. Report also included affirmative estimates of expected credit losses for finance company’s securitized portfolio.
  • Served as testifying expert in litigation involving the subprime automobile finance industry. The litigation, brought by the monoline insurer of the ABS portfolios, involved breach of servicing contract issues and required a detailed forecast of “but-for” net credit losses. Evaluated the reasonableness of various sets of credit loss forecasts. Prepared two expert reports that analyzed industry structure, evaluated underwriting and servicing practices, forecasted credit losses for damages purposes, and rebutted opposing experts’ methodologies. Demonstrated postservicing loss experience consistent with preservicing loss performance. Testified in two depositions on the content of two expert reports.
  • On behalf of Mitsubishi Motors Credit of America (MMCA), provided direct and cross-examination testimony regarding expected credit losses for loans originated by MMCA and subsequently sold to Household Auto Finance in ADR proceeding of HSBC Auto Finance, Inc v. Mitsubishi Motors Credit of America, Inc. Demonstrated that the credit loss information submitted by the offeror during the due diligence phase of a loan portfolio sale accurately reflected the credit quality of the portfolio. Successfully challenged the purchaser’s damages estimate. The three judge arbitration panel, in ruling unilaterally for our client, found that the purchaser’s damages calculation was highly speculative and not supported by the evidence.
  • Performed due diligence on a multibillion dollar subprime auto finance company on behalf of an outside investor purchasing a contract originated by the finance company. Analysis included a comparison of company disclosures regarding static pool return on asset performance, repossession, default insurance recoveries with underlying account records, interest and noninterest revenues, attrition, and servicing expenses. Constructed lifetime ROE, NPV, and IRR estimates based on projected credit losses, revenues, and cash flows.
  • Composed an expert report analyzing the business model, operating performance, and expected credit losses for a subprime auto finance company. Estimated future cash flows for each quarterly static pool. Report included detailed analysis regarding the expected performance improvement in credit losses related to the company’s recent adoption of custom-built statistical credit scoring model. Forecasts included estimated loan defaults, repossession recoveries, interest and noninterest revenues, attrition, and servicing expenses.
  • One of our experts managed the process of in-depth due diligence of 10 subprime auto finance companies. Due diligence process began with strategic review of industry and initial target list of 35 companies for potential acquisition. Due diligence and portfolio valuation recommendations led to the acquisition of a $300 million auto finance company by a top-10 credit card issuer.
  • Provided expert consulting services as part of arbitration proceedings involving a dispute over residual value insurance coverage and reinsurance in connection with portfolio of automobile leases. Constructed a stratified sampling strategy to evaluate various coverage issues and audit key underwriting characteristics for the selected sample. Analysis included critiques of statistical sampling techniques used by other experts involved in the proceedings.