CFI SECURIZATION BULLETIN
February 2006
Welcome to the CFI Securitization Bulletin!
This monthly publication is designed primarily to inform you of the various monthly movements in interest rates, and predictions of their future movements. We will also share with you statistics regarding the entire CFI Trust portfolio so you can compare your performance against the 32 other originators. The Bulletin will also include useful information regarding legal issues that may impact your business, as well as tips and suggestions about billing and audits.
Although we will always update you on the interest rates the rest of the information in the Bulletin will vary by month as the various members of the Securitization Team here at CFI take turns sharing their expertise with you.
If you want others in your organization to receive the CFI Securitization Bulletin please let us know as we would be happy to add them to our distribution list. If there are topics or issues you would like to see addressed in future issues of the Bulletin then again, just let us know.
Burns’ Briefs
Congratulations to the Toronto Automobile Dealers Association (“TADA”) for its efforts in resolving the issue of vicarious liability for lessors. A lessor’s liability is capped at $1 million. The lessor’s liability in any judgment will be the difference, if any, between the amount of the insurance carried by the lessee and the $1 million maximum. This liability issue has been outstanding and providing uncertainty for a long time. This resolution is a terrific result for the leasing industry.
You should be aware that CFI is now an associate member of the TADA. We have been working with the TADA in finalizing its form of motor vehicle lease which is being revised in consultation with the Government to ensure compliance with the amendments to the Consumer Protection Act (“CPA”) which was proclaimed into force late last year. These relatively new requirements make it even more important to use a lease which complies with the CPA as well as setting appropriate residual values. You may order copies of the TADA form of lease, customized as you desire, through CFI. I will be following up to ensure all originators are compliant by either using the TADA form or providing me with a letter from legal counsel confirming compliance. To give you an idea of the price, a minimum order of a package of 250 customized lease forms costs $ 293.00. You might think of comparing that cost against your lawyer’s hourly rate.
Rozmin’s Corner
For the last few months, economists have been as dependable as the weather man on the direction of the 2 year bond rate. The trend over the last year, when graphed, would bear a close resemblance to the results of a guilty polygraph! But even Alan Greenspan after his 18 years in the Federal Reserve was baffled by the trend of the long term rates while the short term rates were disciplined by regular 25 bps hikes. On this balmy side of the border, Bank of Canada raised the prime rate last week to 5.25% and is expected to do the same on March 7th in spite of the strong loonie to keep in step with the Fed rate hikes. As usual, I will be calling all the originators later this month with the fixed and float rates with the option to either lock in their portfolio or ride the wave and make the extra spread at the lower floating rate. However, the best strategy for all originators at all times would be to diversify and maintain a good balance of fix and float in their lease portfolio.
As at February 1st, 2006 the floating rate is 4.78% and the rate to lock in is 5.37%. As at the end of January, 65% of the CFI Trust funding was fixed and 35% was floating. Six months ago those percentages were at 57% fixed and 43% floating. On a somber note, please note that CFI will be raising the present value rates by 25 bps for all advances after the February cutoff date (Feb 7th for the 10th of the month clients and Feb 10th for the 15th of the month clients) and also on all leases funded on a floating rate basis (excluding swaps). I did send out an email to all originators earlier this week detailing the cause and the effect of the rate change – however if you have any questions please call.
Bruce on the Portfolio
Hello. Within CFI, I am the person responsible for sending you the monthly invoices for leases and ordinary course terminations. Just as Rozmin can see trends in the CFI Trust portfolio in terms of originators fixing or floating interest rates, I see the trends in delinquencies. In other words, I can spot trends in arrears in an originator’s portfolio over time. Consider our entire CFI Trust portfolio. F or example, at the end o f November, 2005, 0.63% of the portfolio was over 60 days. Three months prior to that, in August, 2005, 0.73% of the portfolio was over 60 days, a slight improvement. I can also inform you that the average remaining term of a lease in the CFI Trust is 21 months.
If you or anyone else in your organization has any questions, comments or suggestions to improve our billing or other financial information then please do not hesitate to contact me.
Financial Products & Services
When you think of us at CFI please remember that in addition to the CFI Trust, there is also the CFI Asset Trust which was formed in response to originators who had opportunities to fund asset classes other than motor vehicle leases and conditional sales contracts. Examples of other asset classes are heavy duty trucks, freightliners and various types of equipment. There are now 12 originators to the CFI Trust who have originated approximately $11 million i n assets. There is also the Originators Insurance Plan which can be accessed to offer the most competitive rates to your customers.
Questions, comments, or concerns may bedirected to the appropriate person:
General Ph: 416-364-6191
Fax: (416) 364-6642
Email: .(JavaScript must be enabled to view this email address)
John Burns: (416) 673-2366
Peter Karageorgos: (416) 673-2355
Wendy Henderson: (416) 673-2367
Rozmin Patel: (416) 673-2361
Bruce Wonnacott: (416) 673-2353