Methods · Independent research

How a subprime book
gets read.

These are method notes. Each one walks through an analysis a risk desk or a warehouse bank actually runs on a subprime auto book, in plain English, with the formulas, the thresholds, and a worked synthetic example on the page. Every number is either cited to a named public source or labeled synthetic. The write-ups are the whole point.

Question 01
"Something is dragging the book. Where is it coming from?"
Note 01 · Loan tape
Reading a loan tape: vintage curves, aging, and attribution
How a loan-level tape turns into static-pool vintage curves, delinquency aging, and channel attribution. Those three views show deterioration months before the aggregate moves. Walked through on a synthetic tape.
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Note 02 · Segments
The segments carrying the loss
A book can read fine on the aggregate while two or three segment combinations quietly carry it down: deep-subprime on 84-month paper, or aged luxury collateral. How a cross-cut scan across nine risk dimensions finds them.
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Note 03 · Dealer channel
Reading the dealer channel
How dealer-level loss rates, severe lates, and early payment defaults separate a soft channel from a bad one, and why the worst dealer in a book rarely looks bad in any single month.
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Question 02
"The bank call is coming. Where do I stand, and when does a trigger break?"
Note 04 · Covenant runway
Covenant runway: the month the trigger breaks
Take current metrics and their monthly rate of change, project each warehouse trigger forward, and the runway falls out: the month a slope that reads "fine" turns into a cash sweep. Worked on a synthetic covenant package.
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Note 05 · Composite read
The composite read: three numbers against warehouse bands
Loss rate, severe delinquency, and weighted average credit score, scored against typical warehouse covenant bands. A sixty-second read on where a book stands before anyone opens the tape.
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Question 03
"A loan just went bad. What comes back, and how fast do I have to move?"
Note 06 · Recovery decay
Recovery decay: what a day of delay costs
The car barely depreciates day to day; the odds of getting it back fall off a cliff. A decay curve that prices the gap between "stage the file" and "go now," worked on a synthetic BHPH account.
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Note 07 · State law
The four levers of recovery, state by state
Self-help repossession, right to cure, deficiency judgments, and wage garnishment. Those four statutory levers decide what a defaulted loan actually returns, mapped across all 50 states.
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Question 04
"Who gets in the door?"
Note 09 · Deal economics
The economics of a single deal
One contract taken apart: acquisition cost, expected loss, recovery, servicing drag, and discount. The arithmetic that decides whether a deal ever had a margin to begin with. Worked on a synthetic contract.
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Note 10 · Term vs. collateral
When the term outlives the car
Long terms on old collateral push the payoff date past the collateral's useful life. Where the crossover sits, why negative equity concentrates there, and how to read term against vehicle age.
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Worked examples · Synthetic books Two blinded synthetic books, each walked through the methods above end to end. Every figure on those pages is synthetic and labeled as such.
Worked example · Indirect
How to read a subprime book, indirect
One blinded synthetic book of dealer-originated paper, walked through the methods end to end: vintage curves, dealer attribution, covenant projection, and the read that falls out.
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Worked example · Direct
How to read a subprime book, direct
One blinded synthetic book of direct-to-borrower paper, walked through the methods end to end: vintage curves, borrower segments, covenant projection, and the read that falls out.
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Market briefs The borrowing-base certificate as the single point of failure in BHPH warehouse funding, one problem, read from both seats.
Market brief · Operator's seat
The certificate problem, the operator's seat
The monthly borrowing-base certificate is self-reported, and the Tricolor record shows what happens when the market cannot tell a clean one from a fabricated one. What that problem looks like from the seat that files it, read against the Fed note and the public record.
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Market brief · Lender's seat
The certificate problem, the lender's seat
The same certificate from the other side of the table: what a warehouse lender can and cannot see in a self-reported borrowing base, and how the sector re-rated after Tricolor. Read against the Fed note and the public record.
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