Mitigating losses is a priority for the lender as it braces for a flood of consumers coming out of forbearance grace periods. Ally CFO Jenn LaClair said on an investor call Friday that consumers coming out of forbearance in the second quarter represented some of the lender’s riskier borrowers, and that the bulk of the deferred accounts with payments more than 30 days past due expired in that time period.
In the first quarter, 1.1 million borrowers requested forbearance from Ally, 70 percent of which never had a late payment. One-fourth of Ally’s auto loan customers asked for payment deferrals in the first weeks of the pandemic.
Payment performance of these borrowers have so far been positive and in line with expectations, LaClair said. Twenty-four percent of borrowers in forbearance status made car payments ahead of schedule.
Deferment requests tapered off substantially in May and June from March and April highs. To date, Ally has processed 1.31 million cumulative deferral program accounts, with 87 percent of customers up-to-date on their payments.
To protect from future credit losses, Ally also applied more manual underwriting processes in lieu of automated decisioning and raised the credit threshold for auto loan customers, she said.
Higher provisions for loan losses, or the cash a lender sets aside for loans it does not expect will be repaid, were up $76 million year-over-year in the second quarter to $256 million. Though elevated, that’s substantially less than the $766 million it allocated for auto-related loan losses in the first quarter.
The majority of Ally commercial dealers “actively participated in at least one-of-four COVID-19 relief offerings,” the Detroit lender said. Thirty-nine percent of wholesale dealers deferred floorplan interest and insurance payments to the bank in the second quarter, down 20 percentage points from dealer requests in the first wave of the outbreak.
