March remittance reports showed higher month-over-month (MoM) annualized net losses and prepayment speeds. Meanwhile, delinquency rates were relatively steady across securitized solar loan pools during the February collection period. Current index values as well as MoM and year-over-year (YoY) changes are presented in the table below.
As most solar loan ABS transactions are structured with negative excess spread (the weighted average loan interest rate lower than the interest rate on the ABS notes), a prolonged period of low prepayments can lead to an erosion of credit enhancement (see Solar Loan ABS: Credit Risks Rise as Prepayments Fall). Notably, solar loan prepayments increased MoM, possibly driven by the recent rise in home sales, income tax credit (ITC) prepayments within a few deals (borrowers typically prepay around month 18 to keep…