Automotive chickens coming home to an illegal alien roost?

 

If you've been following the cascade of bankruptcies in the sub-prime auto loan sector, you'll know that Tricolor Auto's collapse has precipitated all sorts of third-order consequences.  Ace has the details.

Tricolor Auto Group, the nation’s seventh largest used car dealer (and 3rd biggest in Texas and California), just filed for Chapter 7 bankruptcy – e.g. liquidation. Its target customer had been illegal aliens, and with President Trump deciding to start enforcing the nation’s immigration laws, there has suddenly been a major “market correction” in that market segment. Not only has the customer base largely evaporated, but so have loan repayments, which Tricolor also serviced.

The “tri colors” that the name references are the colors of the Mexican flag – red, white, and green.

While the sudden loss of customers and loan repayments was the catalyst that caused the final collapse of Tricolor, its failure has revealed so much more, including securities fraud, Wall Street ESG gimmickry, race-based federal programs, etc.

Tricolor has securitized more than $2 billion of its very high risk auto loans over the past seven years. The most recent issuance was in June of this year, with JP Morgan Chase and other money center banks peddling more than $200 million of “social bonds” to credulous investors. These securities are certified as “social bonds” by the US Treasury’s CDFI (“Community Development Financial Institution”) program because Tricolor focuses on selling its cars and financial services to underserved communities, specifically Spanish-speaking non-citizens. Tricolor’s CEO, Daniel Chu, was quoted by Barron’s in 2022 as stating, “No one else is providing meaningful dollar credit to an illegal immigrant.”

. . .

You may recall that a major contributor to the financial crash of 2008 was Wall Street wizards packaging up a bunch of sub-prime mortgages, securitizing them, and then selling those “mortgage backed securities” to investors as something other than perfumed garbage. That is effectively what Tricolor has been doing with its auto loans, with the help of Wall Street.

. . .

Per Car Dealership Guy, Tricolor’s bonds have collapsed to a value of 12 cents on the dollar, virtually wiping out the investors who bought those bonds. But as bad as this all sounds so far, it’s actually worse. There was massive fraud by Tricolor, which is causing losses to all parties who did business with it.

There's more at the link.  It's worth reading in full if you've missed recent developments.

A new wrinkle has been added to the fiscal mess Tricolor has left behind.  According to a friend who works with this sort of fraud, many of Tricolor's illegal alien customers - and similar customers at other sales companies and/or lending institutions - bought their vehicles relatively recently, because they could see that Trump was going to make America less than welcoming for their ilk.  They've now taken their vehicles across the border to Mexico and points south, still owing pots of money on them, and - of course - they're no longer paying the monthly note.  It looks as if multiple billions of dollars in auto loans are suddenly non-performing.

If banks and lending institutions are required (as they should be) to list these non-performing assets on their books, it would trigger bankruptcy proceedings for many of them.  The banking sector is terrified that this may happen, and Real Soon Now, so they're (behind the scenes) begging and pleading with the financial authorities to give them some breathing room before forcing them all to come clean.  Since most of those banks are the ones that were behind de-banking and de-funding many of President Trump's supporters and sympathizers, I understand they're caught between a rock and a hard place, to put it mildly.

Pass the popcorn . . . and if you're planning to buy a motor vehicle on credit, it might be a very good idea to do so quickly, before the lending market dries up.  The same might be said of other large loans (e.g. housing, etc.), because they, too, may be affected by this mess.

Peter