This is a worked example: one synthetic book read the same way a warehouse bank's surveillance team eventually reads it, except caught early, while there is still time to act. It is here to show what the analysis looks like, nothing more.
One synthetic book run through five tools: the dashboard, the dealer scorecard, the vintage static pool, the vehicle-to-term matcher, and the covenant projector. Read it top to bottom. It moves from "this book looks fine" to the exact dealers, the exact month, and the three moves that keep the line open.
Start with the headline numbers, the same five at the top of this page. Net charge-offs running 9.6% annualised, 90+ delinquency at 4.2%, weighted FICO 574. The NCO covenant cap is 13.5%. So today the book sits almost four full points under its cap.
If we stopped right here, you would feel fine. Your bank would feel fine on the snapshot. The note would end here. Most reviews stop here, which is exactly why most problems are found by the lender's bank instead of the lender.
Look at the "Monthly Δ" column. Your NCO is not parked at 9.6%, it is climbing 0.65 points every month. Your 90+ DPD is climbing 0.30. The level is comfortable. The trajectory is not.
That slope is a straight line I fit through your last six months of readings. Carry it forward and the comfortable gap to your cap closes faster than anyone in the room expects.
| Metric | Current | Monthly Δ | Covenant cap | Headroom | Status |
|---|---|---|---|---|---|
| NCO (annualised) | 9.60% | +0.65 pp | 13.50% | 3.90 pp | ⚠ 6 months |
| 90+ DPD | 4.20% | +0.30 pp | 6.00% | 1.80 pp | ⚠ 6 months |
| WA FICO | 574 | −1.2 / mo | 560 floor | 14 pts | ✓ Watch |
| 60+ DPD | 7.10% | +0.40 pp | n/a | n/a | ⚠ Elevated |
| Advance rate (blended) | 112% LTV | stable | n/a | n/a | ✓ In policy |
This is the question you ask the second you see the slope: is my whole book deteriorating, or is a handful of dealers dragging the average. Because the answer decides whether you reach for a sledgehammer or a scalpel.
So we attribute. Every dealer, ranked by what they are actually costing you, not by volume, by loss and by how early their paper goes bad.
| Dealer | Loans | % of book | Net loss | EPD rate | Severe 60+ | Flag |
|---|---|---|---|---|---|---|
| Dealer N | 92 | 4.6% | 29.3% | 38.1% | Toxic | |
| Dealer H | 148 | 7.4% | 27.0% | 35.8% | Toxic | |
| Dealer C | 200 | 10.0% | 27.8% | 34.2% | Toxic | |
| Dealer F | 118 | 5.9% | 9.1% | 18.3% | Watch | |
| Dealer M | 95 | 4.8% | 8.4% | 17.1% | Watch | |
| 13 remaining dealers | 967 | n/a | 6.8% | 13.2% | Clean |
Three names do almost all of the work: Dealers C, H, and N. Together they are 22% of your originations and 51% of your severe delinquency. Their early-payment-default rate is around 28%, nearly four times your network median. That is the tell. EPD this high means these loans were not good loans that went bad. They were bad the day they were written.
Meanwhile your 13 clean dealers are running 5.1% loss, comfortably under market. You do not have a book problem. You have a three-dealer problem hiding inside a book-level average.
Knowing who is half the answer. Knowing when tells you whether it is still happening or already behind you. So we line up every origination quarter as its own static pool and watch each one age at the same number of months on book. That strips out the "newer loans look better because they are younger" illusion.
| Vintage | Loans | Orig $ | Avg MOB | 60+ DPD | Charged off | Cum net loss |
|---|---|---|---|---|---|---|
| 2023 Q1 | 371 | $5.9M | 39 | 6.1% | 9.4% | 9.8% |
| 2023 Q2 | 368 | $5.8M | 36 | 6.4% | 8.9% | 9.3% |
| 2023 Q3 ▲ | 374 | $5.9M | 33 | 8.8% | 11.2% | 12.4% |
| 2023 Q4 ▲ | 369 | $5.8M | 30 | 9.1% | 10.8% | 11.9% |
| 2024 Q1 | 377 | $6.0M | 27 | 5.9% | 5.2% | 6.1% |
| 2024 Q2 | 141 | $2.1M | 24 | 4.8% | 3.1% | 3.4% |
The break is the back half of 2023. Your Q3 and Q4 pools are running 12% cumulative loss at month 30, while your older 2022 and early-2023 paper sat near 9% at the same age. Same dealers underneath, same loan structure. And notice 2024 is already coming in cleaner, that tells me whatever changed in late 2023 has partly self-corrected, but the bad vintage is still on your book bleeding.
Here is the why, because when the bank asks, you want to say you understand the cause, not just that you spotted the symptom. The flagged paper is 72-month terms on 8 to 10 year old vehicles. Put the depreciation curve next to the amortization curve and the problem draws itself.
You advanced above the car's value on day one, that is your 112% blended LTV. On a 9-year-old vehicle the value falls off a cliff while a 72-month note barely moves in the early years. The negative-equity gap is widest right where these loans actually default, months 18 to 36. A borrower who hits a bump there cannot sell or refinance their way out, the car is worth thousands less than they owe, so the keys come back instead.
This is the slide your warehouse bank will care about more than any other, because these are their covenants. I take the slopes we measured and run them to the line. Same math they will run, just earlier.
NCO and 90+ DPD both break in month six. The same month. October. A breach trips your cash sweep, the sweep halts new originations, and you lose access to the line at the exact moment you would need it to grow out of the problem. Your FICO floor is not the worry. That is a year out. The fourth card is the one I like ending on, because that is this same book after we act. Hold that thought.
The instinct under covenant pressure is a book-wide pullback, cut everyone. That is the panic move, and it punishes your 13 clean dealers for the sins of three. It also kills the yield you need to recover. Because we attributed the loss to named dealers, we can do something far more precise.
That one move flattens your slope from 0.65 to 0.22 a month, which pushes the breach from October out past the 18-month horizon. You recover roughly 140 basis points of yield and about 1.8 million of covenant headroom versus the book-wide cut, and your healthy dealers never feel a thing. That fourth covenant card from the last section, the green one, that is this scenario.
Here is where the numbers lead. Short enough to act on in a week, documented enough to stand up on a bank's next surveillance call.