What are the main ABS types outside of mortgages and how do they differ structurally?

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AcadiFi · Accepted Answer

Non-mortgage ABS pool consumer or commercial receivables into tradable bonds. The dominant asset classes and their structural features:

- Auto loan ABS: 3-7 year retail auto loans; amortizing collateral; strong historical performance; subordination + overcollateralization + reserve funds are common credit enhancement layers.
- Credit card ABS: revolving receivables; master trust structure with revolving and amortization periods; early-amortization triggers protect investors.
- Student loan ABS: federally-guaranteed (FFELP legacy) or private; very long maturities; complex prepay dynamics from deferment, forbearance, income-driven plans.
- Equipment lease ABS: commercial leases on trucks, copiers, construction equipment; diverse lessees; residual value risk on true leases.
- Dealer floorplan ABS: short-term auto dealer inventory loans; fast revolving cash flow.
- Esoteric ABS: whole business (franchise royalties), solar loans, timeshare receivables, aircraft leases.

Common architecture: a bankruptcy-remote special purpose vehicle (SPV) buys the receivables, issues senior/mezzanine/subordinate tranches, and uses excess spread to build reserves. Ratings depend on credit enhancement relative to expected loss.

Key difference from RMBS: borrower-level prepayment options are usually weak or absent (auto loans have modest refi activity; cards have no maturity), so duration risk is stable but credit risk is more prominent. That's why ABS analysis emphasizes pool loss curves, cumulative net losses (CNL), and trigger mechanics.

What are the main ABS types outside of mortgages and how do they differ structurally?

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