Fitch: U.S. Auto Lease ABS Issuance Still Revving Up in 2007.

NEW YORK -- With strong vehicle sales levels and healthy consumer demand for leasing, U.S. auto lease securitization issuance will likely continue to grow in 2007, according to a criteria report by Fitch Ratings.

Weak performance of existing ABS transactions in 1999-2002, coupled with the lower originations of new lease assets, translated into a decline of total auto retail lease ABS issuance levels, from the $4.8 billion in 1999 to $1.4 billion in 2003. The trend was reversed in 2005 with new issuances reaching $5.3 billion and achieving a new peak of close to $6 billion in 2006.

Fitch's auto lease ABS rating criteria has remained essentially unchanged as fundamental criteria and methodology remains similar to the original criteria report released in 2000, with updates on industry information and related items.

Auto lease receivables are created by the lessor purchasing a new or used vehicle from a manufacturer or a dealer and leasing it to a consumer. The consumer pays the lessor for the right to use the vehicle during the term of the lease which typically varies from 12-60 months. The consumer is responsible for the vehicle's maintenance and insurance for the duration of the lease. At the maturity of the lease, consumers may purchase the vehicle for the stated residual value or return the vehicle to the dealership from which it was leased. If the dealer chooses not to buy the vehicle, the lessor takes possession and assumes responsibility for vehicle disposition and residual value realization.

The securitization of auto leases involves some unique challenges relative to other auto-related ABS. Unlike auto loans, in which case the vehicle is owned by the borrower, the lessor is the owner of the vehicle which creates difficulties in isolating the leases and vehicles from the assets of the lessor. In addition to titling issues, lease asset securitizations must deal with concerns regarding priority security interest of the securitization trust assets against possible liens, such as a Pension Benefit Guaranty Corp. (PBGC) lien arising from the Employee Retirement Income Security Act of 1974 (ERISA) and vicarious tort liability. As such, lease ABS structures tend to be more complex when compared to those of auto loans and are designed to address the above-mentioned issues. Auto lease ABS are also subject to residual value risk and are exposed to the volatility of used vehicle prices and the wholesale auto market that require a somewhat unique approach in analyzing desirable credit enhancement levels.

Fitch's updated 'Auto Lease Asset-Backed Securities (ABS) Criteria' is available on the Fitch Ratings web site at www.fitchratings.com.

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