Filed Pursuant to Rule 424(h)
Registration No. 333-261901 and 333-261901-05

 

The information in this preliminary prospectus is not complete and may be changed. We may not deliver the notes described in this preliminary prospectus until we deliver a final prospectus. This preliminary prospectus is not an offer to sell the notes and is not soliciting an offer to buy the notes and there shall not be any sale of the notes in any jurisdiction where such offer, solicitation or sale is not permitted.

 

Subject to Completion, dated August 9, 2022

PROSPECTUS

 

 

$949,640,000⁽¹⁾

Santander Drive Auto Receivables Trust 2022-5

Issuing Entity

Central Index Key Number: 0001941255

 

Santander Drive Auto Receivables LLC		Santander Consumer USA Inc.
Depositor		Sponsor and Servicer
Central Index Key Number: 0001383094		Central Index Key Number: 0001540151

 

Santander Drive Auto Receivables Trust 2022-5 will issue asset-backed notes with an aggregate initial principal amount of $1,315,400,000 (the “Base Transaction”) or an aggregate initial principal amount of $1,913,690,000 (the “Upsize Transaction”). If the Base Transaction is issued, the following notes will be issued:

 

		Initial Principal Amount(3)(4)								Interest Rate						Final Scheduled Payment Date								Price to Public(5)								Underwriting Discount								Proceeds to the Depositor
Class A-1 Notes(2)		$	196,000,000							%							September 15, 2023
Class A-2 Notes			350,000,000							%							January 15, 2025								%								%								%
Class A-3 Notes			298,960,000							%							August 17, 2026								%								%								%
Class B Notes			137,020,000							%							March 15, 2027								%								%								%
Class C Notes			163,660,000							%							October 16, 2028								%								%								%
Class D Notes(2)			169,760,000							%							December 16, 2030
Total		$	1,315,400,000																						$								$								$

 

(1)

The aggregate initial principal amount of the offered notes will be $949,640,000 or $1,381,720,000. The Sponsor will make the determination regarding the aggregate initial principal amount of the notes based on, among other considerations, market conditions at the time of pricing. See “Risk Factors—The issuing entity has issued multiple classes of notes, and your notes may be more sensitive to losses, be affected by conflicts of interest between classes and have reduced liquidity or voting power because of an unknown retention of notes—The market value, liquidity and voting power of your notes may be adversely impacted by retention of notes by the depositor or its affiliates or by the unknown aggregate initial principal amount of the notes.”

(2)	The Class A-1 notes and the Class D notes are not being offered hereby and are anticipated to be either privately placed or retained by the depositor or another affiliate of SC. The Class A-1 notes and the Class D notes will be entitled to certain payments as described herein.

(3)	All or a portion of one or more of the classes of notes offered hereby may be initially retained by the depositor or an affiliate thereof.

(4)

If the Upsize Transaction is issued, the following notes will be issued: $285,000,000 of Class A-1 notes, $509,000,000 of Class A-2 notes, $435,280,000 of Class A-3 notes, $199,340,000 of Class B notes, $238,100,000 of Class C notes and $246,970,000 of Class D notes. The Sponsor will make the determination regarding the aggregate initial principal amount of the notes based on, among other considerations, market conditions at the time of pricing. See “Risk Factors—The issuing entity has issued multiple classes of notes, and your notes may be more sensitive to losses, be affected by conflicts of interest between classes and have reduced liquidity or voting power because of an unknown retention of notes—The market value, liquidity and voting power of your notes may be adversely impacted by retention of notes by the depositor or its affiliates or by the unknown aggregate initial principal amount of the notes.”

(5)	Plus accrued interest, if any, from the closing date.

•

The notes are payable solely from the assets of the issuing entity, which consist primarily of receivables, which are motor vehicle retail installment sale contracts and/or installment loans that are secured by new and used automobiles, light-duty trucks, SUVs and vans, substantially all of which are the obligations of “sub-prime” credit quality obligors, and funds on deposit in the reserve account.

•

The issuing entity will pay interest on and principal of the notes on the 15th day of each month, or, if the 15th day is not a business day, the next business day, starting on September 15, 2022.

•

Credit enhancement for the notes will consist of overcollateralization, a reserve account funded with an initial amount of not less than 1.00% of the pool balance as of the cut-off date, excess interest on the receivables, and, in the case of each class of the offered notes, the subordination of certain payments to the noteholders of less senior classes of notes.

•

The issuing entity will also issue non-interest bearing certificates representing the equity interest in the issuing entity, which are not being offered hereby.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The issuing entity is being structured so as not to constitute a “covered fund” as defined in the final regulations issued December 10, 2013, implementing the “Volcker Rule” (Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act).

 

		UNDERWRITERS
SOCIETE GENERALE		Amherst Pierpont		BNP PARIBAS

Solely with respect to the Class A notes:

Academy Securities		Ramirez & Co., Inc.

The date of this prospectus is August    , 2022.

TABLE OF CONTENTS

 

		Page
WHERE TO FIND INFORMATION IN THIS PROSPECTUS			iv
REPORTS TO NOTEHOLDERS			v
NOTICE TO INVESTORS: UNITED KINGDOM			vi
NOTICE TO INVESTORS: EUROPEAN ECONOMIC AREA			vii
NOTICE TO RESIDENTS OF CANADA			vii
NOTICE TO RESIDENTS OF THE REPUBLIC OF KOREA			viii
SUMMARY OF STRUCTURE AND FLOW OF FUNDS			ix
SUMMARY OF TERMS			1
THE PARTIES			1
THE OFFERED NOTES			2
THE CERTIFICATES			2
INTEREST AND PRINCIPAL			2
EVENTS OF DEFAULT			5
ISSUING ENTITY PROPERTY			5
STATISTICAL INFORMATION			7
PRIORITY OF PAYMENTS			8
CREDIT ENHANCEMENT			8
TAX STATUS			10
CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. BENEFIT PLANS			10
U.S. CREDIT RISK RETENTION			10
EU SECURITIZATION REGULATION AND UK SECURITIZATION REGULATION			11
CERTAIN VOLCKER RULE CONSIDERATIONS			12
RATINGS			12
REGISTRATION UNDER THE SECURITIES ACT			12
CONFLICTS OF INTEREST			12
RISK FACTORS			13
USE OF PROCEEDS			27
THE ISSUING ENTITY			27
Limited Purpose and Limited Assets			27
Capitalization and Liabilities of the Issuing Entity			28
The Issuing Entity Property			29
THE TRUSTEES			29
The Owner Trustee			29
Resignation or Removal of the Owner Trustee			30
The Indenture Trustee			30
Role of the Owner Trustee and Indenture Trustee			31
THE DEPOSITOR			32
THE SPONSOR			32
U.S. Credit Risk Retention			33
EU Securitization Regulation and UK Securitization Regulation			36
THE ORIGINATOR			37
Receivable and Calculation Methods			38
Receivable Origination Channels			38
Credit Risk Management and Underwriting			38
THE SERVICER			41
SERVICING BY SC			42
Perfection of Security Interests			46
THE ASSET REPRESENTATIONS REVIEWER			46

 

i

TABLE OF CONTENTS

(continued)

 

		Page
AFFILIATIONS AND CERTAIN RELATIONSHIPS			48
THE RECEIVABLES POOL			48
Calculation Methods			48
Exceptions to Underwriting Criteria			48
Asset Level Information			51
Pool Stratifications as of the Cut-off Date			51
Delinquencies, Repossessions and Credit Losses			71
Delinquency Experience Regarding the Pool of Receivables			74
Information About Certain Previous Securitizations			75
Review of Pool Assets			76
Repurchases and Replacements			77
MATURITY AND PREPAYMENT CONSIDERATIONS			77
THE NOTES			99
General			99
Delivery of Notes			99
Book-Entry Registration			99
Definitive Notes			100
Notes Owned by Transaction Parties			101
Access to Noteholder Lists			101
Statements to Noteholders			101
Payments of Interest			103
Payments of Principal			103
THE TRANSFER AGREEMENTS AND THE ADMINISTRATION AGREEMENT			105
Sale and Assignment of Receivables			105
Representations and Warranties			106
Asset Representations Review			108
Requests to Repurchase and Dispute Resolution			111
Administration Agreement			113
Amendment Provisions			113
Accounts			114
Deposits to the Collection Account			114
Reserve Account			115
Priority of Payments			115
Overcollateralization			117
Excess Interest			117
Optional Redemption			117
Fees and Expenses			118
Indemnification of the Indenture Trustee and the Owner Trustee			118
Collection and Other Servicing Procedures			119
Servicing Compensation and Expenses			119
Collection, Extensions and Modifications of Receivables			119
Realization Upon Defaulted Receivables			120
Servicer Replacement Events			121
Resignation, Removal or Replacement of the Servicer			122
Waiver of Past Servicer Replacement Events			122
Back-up Servicing			122
Evidence as to Compliance			123
THE INDENTURE			124
Material Covenants			124
Noteholder Communication; List of Noteholders			124
Annual Compliance Statement			125
Indenture Trustee’s Annual Report			125

 

ii

TABLE OF CONTENTS

(continued)

 

		Page
Documents by Indenture Trustee to Noteholders			125
Satisfaction and Discharge of Indenture			125
Resignation or Removal of the Indenture Trustee			125
Events of Default			126
Rights Upon Event of Default			126
Priority of Payments Will Change Upon Events of Default that Result in Acceleration			127
Amendment Provisions			130
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES			131
Rights in the Receivables			131
Security Interests in the Financed Vehicles			132
Repossession			134
Notice of Sale; Redemption Rights			134
Deficiency Judgments and Excess Proceeds			134
Consumer Protection Laws			135
Consumer Financial Protection Bureau			136
Certain Matters Relating to Bankruptcy			136
Repurchase Obligation			137
Servicemembers Civil Relief Act			137
Other Limitations			138
Dodd Frank Orderly Liquidation Framework			138
LEGAL INVESTMENT			141
Certain Volcker Rule Considerations			141
Requirements for Certain EU and UK Regulated Persons and Affiliates			141
MATERIAL FEDERAL INCOME TAX CONSEQUENCES			146
The Issuing Entity			147
The Offered Notes			147
Foreign Account Tax Compliance Act			151
Possible Alternative Treatments of the Notes and the Issuing Entity			152
TAX SHELTER DISCLOSURE AND INVESTOR LIST REQUIREMENTS			153
STATE AND LOCAL TAX CONSEQUENCES			154
CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. BENEFIT PLANS			154
UNDERWRITING (CONFLICTS OF INTEREST)			156
Conflicts of Interest			158
Offering Restrictions			158
United Kingdom – Prohibition on Offers to UK Retail Investors			159
United Kingdom – Other Regulatory Restrictions			159
European Economic Area			159
FORWARD-LOOKING STATEMENTS			160
LEGAL PROCEEDINGS			160
LEGAL MATTERS			160
GLOSSARY			161
INDEX			I-1
APPENDIX A Static Pool Information About Certain Previous Securitizations			A-1

 

iii

WHERE TO FIND INFORMATION IN THIS PROSPECTUS

This prospectus provides information about the issuing entity, Santander Drive Auto Receivables Trust 2022-5, including terms and conditions that apply to the notes offered by this prospectus.

You should rely only on the information provided in this prospectus, including the information incorporated by reference. We have not authorized anyone to provide you with other or different information. We are not offering the notes offered hereby in any jurisdiction where the offer is not permitted. We do not claim that the information in this prospectus is accurate on any date other than the date stated on the cover.

We have started with two introductory sections in this prospectus describing the notes and the issuing entity in abbreviated form, followed by a more complete description of the terms of the offering of the notes. The introductory sections are:

 

•

Summary of Terms—provides important information concerning the amounts and the payment terms of each class of notes and gives a brief introduction to the key structural features of the issuing entity; and

 

•

Risk Factors—describes briefly some of the risks to investors in the notes.

We include cross-references in this prospectus to captions in these materials where you can find additional related information. You can find the page numbers on which these captions are located under the Table of Contents in this prospectus. You can also find a listing of the pages where the principal terms are defined under “Index” beginning on page I-1 of this prospectus.

If you have received a copy of this prospectus in electronic format, and if the legal prospectus delivery period has not expired, you may obtain a paper copy of this prospectus from the depositor or from the underwriters upon request.

In this prospectus, the terms “we,” “us” and “our” refer to Santander Drive Auto Receivables LLC.

 

iv

REPORTS TO NOTEHOLDERS

After the notes are issued, unaudited monthly reports containing information concerning the issuing entity, the notes and the receivables will be prepared by Santander Consumer USA Inc. (“SC”), and sent on behalf of the issuing entity to the indenture trustee, which will forward the same to Cede & Co. (“Cede”), as nominee of The Depository Trust Company (“DTC”).

The indenture trustee will also make such reports (and, at its option, any additional files containing the same information in an alternative format) available to noteholders each month via its Internet website, which is presently located at www.sf.citidirect.com. Assistance in using this Internet website may be obtained by calling the indenture trustee’s customer service desk at 1 (888) 855-9695. The indenture trustee will notify the noteholders in writing of any changes in the address or means of access to the Internet website where the reports are accessible.

The reports do not constitute financial statements prepared in accordance with generally accepted accounting principles. SC, the depositor and the issuing entity do not intend to send any of their financial reports to the beneficial owners of the notes. The issuing entity will file with the Securities and Exchange Commission (the “SEC”) all required annual reports on Form 10-K, distribution reports on Form 10-D and current reports on Form 8-K. Those reports will be filed with the SEC under the name “Santander Drive Auto Receivables Trust 2022-5” and file number 333-261901-05. The issuing entity incorporates by reference any current reports on Form 8-K filed after the date of this prospectus by or on behalf of the issuing entity before the termination of the offering of the notes. The issuing entity’s annual reports on Form 10-K, distribution reports on Form 10-D and current reports on Form 8-K, and amendments to those reports filed with, or otherwise furnished to, the SEC will not be made available on SC’s website because those reports are made available to the public on the SEC website as described above.

The depositor has filed with the SEC a Registration Statement on Form SF-3 that includes this prospectus and certain amendments and exhibits under the Securities Act of 1933, as amended, relating to the offering of the notes described herein. This prospectus does not contain all of the information in the Registration Statement. The SEC maintains a website (http://www.sec.gov) that contains reports, registration statements, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 

v

NOTICE TO INVESTORS: UNITED KINGDOM

PROHIBITION ON SALES TO UK RETAIL INVESTORS

THE NOTES ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY UK RETAIL INVESTOR IN THE UNITED KINGDOM (“UK”). FOR THESE PURPOSES, A “UK RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2 OF COMMISSION DELEGATED REGULATION (EU) 2017/565 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED (THE “EUWA”) AND AS AMENDED; OR (II) A CUSTOMER WITHIN THE MEANING OF THE PROVISIONS OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (THE “FSMA”) AND ANY RULES OR REGULATIONS MADE UNDER THE FSMA (SUCH RULES AND REGULATIONS AS AMENDED) TO IMPLEMENT DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2(1) OF REGULATION (EU) NO 600/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUWA, AND AS AMENDED; OR (III) NOT A QUALIFIED INVESTOR (A “UK QUALIFIED INVESTOR”) AS DEFINED IN ARTICLE 2 OF REGULATION (EU) 2017/1129 (AS AMENDED), AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUWA, AND AS AMENDED (THE “UK PROSPECTUS REGULATION”). CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED), AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUWA, AND AS AMENDED (THE “UK PRIIPS REGULATION”) FOR OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO UK RETAIL INVESTORS IN THE UK HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO ANY UK RETAIL INVESTOR IN THE UK MAY BE UNLAWFUL UNDER THE UK PRIIPS REGULATION.

OTHER UK OFFERING RESTRICTIONS

THIS PROSPECTUS IS NOT A PROSPECTUS FOR THE PURPOSE OF THE UK PROSPECTUS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFERS OF NOTES IN THE UK WILL BE MADE ONLY TO A UK QUALIFIED INVESTOR. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THE UK OF NOTES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO TO ONE OR MORE UK QUALIFIED INVESTORS. NONE OF THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS HAS AUTHORIZED, NOR DO THEY AUTHORIZE, THE MAKING OF ANY OFFER OF NOTES IN THE UK OTHER THAN TO UK QUALIFIED INVESTORS.

OTHER UK REGULATORY RESTRICTIONS

THIS PROSPECTUS MAY ONLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED IN THE UK TO PERSONS HAVING PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFYING AS INVESTMENT PROFESSIONALS UNDER ARTICLE 19 (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE “ORDER”), OR TO PERSONS WHO FALL WITHIN ARTICLE 49(2)(A)-(D) (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.) OF THE ORDER OR TO ANY OTHER PERSON TO WHOM THIS PROSPECTUS MAY OTHERWISE LAWFULLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED. NEITHER THIS PROSPECTUS NOR THE NOTES ARE OR WILL BE AVAILABLE TO OTHER CATEGORIES OF PERSONS IN THE UK AND NO ONE IN THE UK FALLING OUTSIDE SUCH CATEGORIES IS ENTITLED TO RELY ON, AND THEY MUST NOT ACT ON, ANY INFORMATION IN THIS PROSPECTUS. THE COMMUNICATION OF THIS PROSPECTUS TO ANY PERSON IN THE UK OTHER THAN PERSONS IN THE CATEGORIES STATED ABOVE IS UNAUTHORIZED AND MAY CONTRAVENE THE FSMA.

 

vi

NOTICE TO INVESTORS: EUROPEAN ECONOMIC AREA

PROHIBITION ON SALES TO EU RETAIL INVESTORS

THE NOTES ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY EU RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA (THE “EEA”). FOR THESE PURPOSES, AN “EU RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, “MIFID II”); OR (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (III) NOT A QUALIFIED INVESTOR (AN “EU QUALIFIED INVESTOR”) AS DEFINED IN ARTICLE 2 OF REGULATION (EU) 2017/1129 (AS AMENDED) (THE “EU PROSPECTUS REGULATION”). CONSEQUENTLY, NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE “EU PRIIPS REGULATION”) FOR OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO EU RETAIL INVESTORS IN THE EEA HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO ANY EU RETAIL INVESTOR IN THE EEA MAY BE UNLAWFUL UNDER THE EU PRIIPS REGULATION.

OTHER EEA OFFERING RESTRICTIONS

THIS PROSPECTUS IS NOT A PROSPECTUS FOR THE PURPOSE OF THE EU PROSPECTUS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFERS OF NOTES IN THE EEA WILL BE MADE ONLY TO AN EU QUALIFIED INVESTOR. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THE EEA OF NOTES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO TO ONE OR MORE EU QUALIFIED INVESTORS. NONE OF THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS HAS AUTHORIZED, NOR DO THEY AUTHORIZE, THE MAKING OF ANY OFFER OF NOTES IN THE EEA OTHER THAN TO EU QUALIFIED INVESTORS.

NOTICE TO RESIDENTS OF CANADA

THE NOTES MAY BE SOLD ONLY TO PURCHASERS IN THE PROVINCES OF ALBERTA, BRITISH COLUMBIA, ONTARIO AND QUEBEC PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPALS THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE NOTES MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 (OR, IN THE CASE OF SECURITIES ISSUED OR GUARANTEED BY THE GOVERNMENT OF A NON-CANADIAN JURISDICTION, SECTION 3A.4) OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (“NI 33-105”), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

 

vii

NOTICE TO RESIDENTS OF THE REPUBLIC OF KOREA

THE NOTES MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO THE APPLICABLE LAWS AND REGULATIONS OF SOUTH KOREA, INCLUDING THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT (“FSCMA”), THE FOREIGN EXCHANGE TRANSACTION LAW (“FETL”) AND THEIR SUBORDINATE DECREES AND REGULATIONS THEREUNDER. THE NOTES MAY NOT BE RE-SOLD TO ANY RESIDENT OF KOREA UNLESS THE PURCHASER OF THE NOTES COMPLIES WITH ALL APPLICABLE REGULATORY REQUIREMENTS FOR SUCH PURCHASE OF NOTES (INCLUDING BUT NOT LIMITED TO GOVERNMENT APPROVAL OR REPORTING REQUIREMENTS UNDER THE FETL AND ITS SUBORDINATE DECREES AND REGULATIONS). THE NOTES HAVE NOT BEEN OFFERED OR SOLD BY WAY OF PUBLIC OFFERING UNDER THE FSCMA, NOR REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA FOR PUBLIC OFFERING. NONE OF THE NOTES HAS BEEN OR WILL BE LISTED ON THE KOREA EXCHANGE. IN THE CASE OF A TRANSFER OF THE NOTES TO ANY PERSON IN KOREA DURING A PERIOD ENDING ONE YEAR FROM THE ISSUANCE DATE, A HOLDER OF THE NOTES MAY TRANSFER THE NOTES ONLY BY TRANSFERRING SUCH HOLDER’S ENTIRE HOLDINGS OF NOTES TO ONLY “ACCREDITED INVESTORS” IN KOREA AS REFERRED TO IN ARTICLE 11(1) OF THE ENFORCEMENT DECREE OF THE FSCMA.

 

viii

SUMMARY OF STRUCTURE AND FLOW OF FUNDS

This structural summary briefly describes certain major structural components, the relationship among the parties, the flow of funds and certain other material features of the transaction. This structural summary does not contain all of the information that you need to consider in making your investment decision. You should carefully read this entire prospectus to understand all the terms of this offering.

Structural Diagram

 

 

(1)	The certificates are not being offered hereby.

(2)	The Class A-1 notes and the Class D notes are not being offered hereby. In addition, all or a portion of one or more other classes of the notes offered hereby may initially be retained by the depositor or an affiliate thereof.

 

ix

Flow of Funds⁽¹⁾

(Prior to an Acceleration after an Event of Default)

 

 

(1)	For further detail, see “The Notes—Payments of Principal” and “The Transfer Agreements and the Administration Agreement—Priority of Payments” in this prospectus.

 

x

 

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

RISK FACTORS

An investment in the notes involves significant risks. Before you decide to invest, we recommend that you carefully consider the following risk factors.

THE CHARACTERISTICS, SERVICING AND PERFORMANCE OF THE RECEIVABLES POOL COULD RESULT IN DELAYS IN PAYMENT OR LOSSES ON YOUR NOTES.

Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your notes.

An outbreak of Coronavirus Disease 2019 (“COVID-19”) led, and will likely continue to lead, to disruptions in global financial markets and the economies of many nations and is resulting in adverse impacts on the economy of the United States (which have included, and may include in the future, a general curtailment of business activity and a significant increase in unemployment) and on the global economy in general (which include supply chain disruptions). The long-term impacts of the social, economic and financial disruptions caused by the outbreak of COVID-19 are unknown. The United States economy has experienced a recession as a result of the outbreak and it is unclear if or when the economy will fully recover or how many obligors have been and will continue to be adversely affected by the outbreak and related efforts by the Federal government and state governments to slow the spread of COVID-19 throughout the nation or whether such efforts will be successful in preventing a resurgence of COVID-19. It is likely that a higher percentage of obligors will seek protection under bankruptcy or debtor relief laws as a result of the financial and economic disruptions related to the outbreak of COVID-19 than is reflected in the sponsor’s historical experience. See “—Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables.” If an obligor were to seek protection under federal or state bankruptcy or debtor relief laws, a court could reduce or discharge completely the obligor’s obligation to repay amounts due on its receivable. As a result, that receivable would be written off as uncollectible and you could suffer a loss if no funds are available from collections or from amounts on deposit in the reserve account to cover losses on the receivables.

It is unclear how many obligors have been and will continue to be adversely affected by the outbreak of COVID-19 and the related economic uncertainty, each of which could have a negative impact on the ability of obligors to make timely payments on the receivables and may result in losses on your notes. Further, certain governmental authorities, including Federal, state or local governments, could enact, and in some cases already have enacted, laws, regulations, executive orders or other guidance that allow obligors to forgo making scheduled payments for some period of time, require modifications to the receivables (e.g., waiving accrued interest), or preclude creditors from exercising certain rights or taking certain actions with respect to collateral, including repossession or liquidation of the financed vehicles. The servicer has the discretion to implement a range of actions with respect to obligors affected by the outbreak or who are experiencing financial hardship, including the discretion to extend or modify the payment schedule of a receivable or to temporarily suspend involuntary repossession activity consistent with the servicer’s customary servicing practices. Across the nation, servicers of motor vehicle receivables, including SC, experienced a sharp increase in requests for extensions and modifications related to COVID-19 and a significant number of such extensions and modifications have been granted, including by SC. Although the frequency of requests for extensions and modifications has declined since the period immediately following the initial outbreak of COVID-19, there may be a future sharp increase in requests from obligors for extensions and modifications related to COVID-19 or general financial hardship.

Because a pandemic such as COVID-19 has not occurred in recent years, and is impacting obligors nationwide, historical loss experience is unlikely to accurately predict the performance of the receivables in the receivables pool. Further, the COVID-19 pandemic and related effects on the United States economy, global financial markets, and the business or operations of the sponsor or the servicer may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related to the ability of obligors to make timely payments on the receivables, used vehicle values, the performance, market value, credit ratings and secondary market liquidity of your notes, and risks of geographic concentration of the obligors.

All of the foregoing could have a negative impact on the performance of the receivables or the liquidity and market value of your notes and, as a result, you may experience delays in payments or losses on your notes.

 

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A receivables pool that includes substantially all receivables that are the obligations of sub-prime obligors will have higher default rates than a receivables pool that includes primarily obligations of prime obligors.

Substantially all of the receivables in the receivables pool are sub-prime receivables with obligors who do not qualify for conventional motor vehicle financing as a result of, among other things, a lack of or adverse credit history, low income levels and/or the inability to provide adequate down payments. While the originator’s underwriting guidelines were designed to establish that, notwithstanding such factors, the obligor would be a reasonable credit risk, the receivables pool will nonetheless experience higher default rates than a portfolio of obligations of prime obligors. In the event of such defaults, generally, the most practical alternative is repossession of the financed vehicle. As a result, losses on the receivables are anticipated from repossessions and foreclosure sales that do not yield sufficient proceeds to repay the receivables in full. See “—The risk and severity of loss on the receivables is generally higher in circumstances where the outstanding principal balance of a receivable is greater than the value of the related financed vehicle, which may result in losses on your notes.” in this prospectus.

The geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes.

The concentration of the receivables in specific geographic areas may increase the risk of loss. A deterioration in economic conditions regardless of reason, a natural or manmade disaster, extreme weather conditions (including an increase in the frequency of extreme weather conditions as a result of climate change) or civil unrest in the states where obligors reside could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables and may consequently adversely affect the delinquency, default, loss and repossession experience of the issuing entity with respect to the receivables of the obligors in such states. See “—Recent and future economic developments may adversely affect the performance of the receivables and may result in reduced or delayed payments on your notes.” As a result, you may experience payment delays and losses on your notes. An improvement in economic conditions could result in prepayments by the obligors of their payment obligations under the receivables. As a result, you may receive principal payments of your notes earlier than anticipated. See “—Certain features of the notes and financial market disruptions may adversely affect the return on your notes or the market value and liquidity of your notes—Returns on your investments may be reduced by prepayments on the receivables, events of default, optional redemption of the notes or repurchases of receivables from the issuing entity.”

As of the cut-off date, based on the states of residence of the obligors, approximately 18.95%, 12.55% and 8.14% of the principal balance of the receivables in the pool, if the Base Transaction is issued, were located in Texas, Florida and California, respectively. As of the cut-off date, based on the states of residence of the obligors, approximately 19.00%, 12.46% and 8.16% of the principal balance of the receivables in the pool, if the Upsize Transaction is issued, were located in Texas, Florida and California, respectively. No other state accounts for more than 5.00% of the principal balance of the receivables in the pool as of the cut-off date. Because of the concentration of the obligors in certain states, any adverse economic factors, natural or manmade disasters, extreme weather conditions (including an increase in the frequency of extreme weather conditions as a result of climate change) or civil unrest in those states may have a greater effect on the performance of the receivables than if the concentration did not exist, which may result in a greater risk of loss on your notes. In particular, there have been predictions that climate change may lead to an increase in the frequency of natural disasters and extreme weather conditions, with certain states bearing a greater risk of the adverse effects of climate change, which could increase the risks related to geographic concentration in the pool.

The impact of climate-change related events, including efforts to reduce or mitigate the effects of climate change, may increase the risk of losses or reduce the return on your notes.

The effects of climate change such as natural disasters or extreme weather conditions (including any predicted increase in the frequency and range of natural disasters and extreme weather conditions as a result of climate change) in the locations where obligors work or reside could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables and may consequently adversely affect the delinquency, default, loss and repossession experience of the issuing entity with respect to the receivables in such states. See “—The geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes.” Further, the pricing of used vehicles is affected by, among other factors, consumer preferences, which may be impacted by consumer perceptions of climate change and

 

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consumer efforts to mitigate or reduce climate change-related events by purchasing vehicles that are viewed as more fuel efficient (including vehicles powered primarily or solely through electricity). An increase in the supply or a decrease in the demand for used vehicles may impact the resale value of the financed vehicles securing the receivables. See “—The risk and severity of loss on the receivables is generally higher in circumstances where the outstanding principal balance of a receivable is greater than the value of the related financed vehicle, which may result in losses on your notes.”

Further, the implementation of new or revised laws or regulations designed to address or mitigate the potential impacts of climate change (including laws which may adversely impact the auto industry in particular as a result of efforts to mitigate the factors contributing to climate change) could have a significant impact on the servicer, the sponsor, the depositor and the issuing entity (including as a result of an adverse impact generally on the auto finance and resale markets) and could adversely affect the timing and amount of payments on your notes. See “—Adverse events affecting the servicer or other transaction parties could result in losses on your notes or reduce the market value or liquidity of your notes.”

Consequently, the impact of climate-change related events, including efforts to reduce or mitigate the effects of climate change, may increase the risk of losses or reduce the return on your notes.

The risk and severity of loss on the receivables is generally higher in circumstances where the outstanding principal balance of a receivable is greater than the value of the related financed vehicle, which may result in losses on your notes.

As of the cut-off date, the majority of the receivables in the pool (by aggregate outstanding principal balance of the receivables in the pool) have a loan-to-value ratio greater than 100%, which means that the outstanding principal balance of the receivable is greater than the value of the related financed vehicle. Further, the rate of depreciation of a financed vehicle could exceed the amortization of the outstanding principal balance of the related receivable. For example, new vehicles normally experience an immediate decline in value after purchase because they are no longer considered to be new. The lack of any significant equity in their vehicles may make it more likely that the related obligors will default in their payment obligations if their personal financial conditions change. A default during the earlier years of a receivable’s term is more likely to result in losses because the proceeds of repossession of the related financed vehicle are less likely to pay the full amount of interest and principal owed on that receivable. Further, the frequency and amount of losses may be greater for receivables with longer terms, because these receivables tend to have a somewhat greater frequency of delinquencies and defaults and because the slower rate of amortization of the principal balance of a longer term receivable may result in a longer period during which the value of the related financed vehicle is less than the remaining principal balance of the receivable. Additionally, obligors on receivables related to financed vehicles affected by a vehicle recall may be more likely to be delinquent in, or default on, payments on their receivables. Although the frequency of delinquencies and defaults tends to be greater for receivables secured by used vehicles, loss severity tends to be greater with respect to receivables secured by new vehicles because of the higher rate of depreciation described above particularly when there is also a decline in used vehicle prices. Similarly, receivables with a higher loan-to-value ratio tend to have a higher severity of loss. Furthermore, specific makes, models and vehicle types may experience a higher rate of depreciation and a greater than anticipated decline in used vehicle prices under certain market conditions including, but not limited to, the discontinuation of a brand by a manufacturer, the termination of dealer franchises by a manufacturer or a product recall.

The pricing of used vehicles is affected by the supply and demand for those vehicles, which, in turn, is affected by consumer preferences (including preferences that may change quickly based on factors such as fuel costs, an actual or perceived increase in extreme weather or consumer perceptions of climate change and consumer efforts to mitigate or reduce climate change-related events by purchasing vehicles that are viewed as more fuel efficient (including vehicles powered primarily or solely through electricity)), economic factors, the introduction and pricing of new vehicle models and other factors, including the impact of vehicle recalls or the discontinuation of vehicle models or brands. Significant increases in the inventory of used motor vehicles subject to a recall may also depress the prices at which repossessed motor vehicles may be sold or delay the timing of those sales. Decisions by a manufacturer with respect to new vehicle production, pricing and incentives may affect used vehicle prices, particularly those for the same or similar models. If programs are implemented by the United States government to stimulate the sale of new vehicles, this may have the effect of further reducing the values of used vehicles, resulting in increased losses that may result in losses on your notes. Further, the insolvency of a manufacturer or ratings

 

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downgrade of a manufacturer may negatively affect used vehicle prices for vehicles manufactured by that company. An increase in the supply or a decrease in the demand for used vehicles may impact the resale value of the financed vehicles securing the receivables. Decreases in the value of those vehicles may, in turn, reduce the incentive of obligors to make payments on the receivables and decrease the proceeds realized by the issuing entity from repossessions of financed vehicles. Additionally, the COVID-19 pandemic and the related economic and financial disruptions have affected both the supply and demand of new and used vehicles, and has affected repossession activity and the market and process for the sale of repossessed vehicles, and supply chain disruptions and a reduction in the supply of new vehicles has contributed to an increase in demand for used vehicles. As a result of the foregoing, the delinquency, repossession and credit loss figures, shown in the tables appearing under “The Receivables Pool—Delinquencies, Repossessions and Credit Losses” in this prospectus, might be a less reliable indicator of the rates of delinquencies, repossessions and losses that could occur on the receivables in the receivables pool than would otherwise be the case.

The servicer’s discretion over the servicing of the receivables may impact the amount and timing of funds available to make payments on the notes.

Although the servicer is obligated to service the receivables in accordance with its customary servicing practices, the servicer has broad discretion in servicing the receivables, including the ability to grant payment extensions and to determine the timing and method of collection and liquidation procedures. The servicer, in its own discretion, may permit an extension on, or a deferral of, payments due or halt repossession activity on a case-by-case basis or more broadly in accordance with its customary servicing practices, for example, in connection with a natural disaster or public health emergency affecting a large group of obligors. See “Servicing by SC” in this prospectus. The servicer granted a significant number of extensions and modifications related to the COVID-19 outbreak, and temporarily suspended involuntary repossession activities nationwide. Although the frequency of extensions and modifications has declined since the period immediately following the initial outbreak of COVID-19 and the servicer has resumed involuntary repossessions and other collections activity where permitted by local law, the frequency of extensions and modifications may increase in the future and the servicer may again elect (or be required) to suspend repossession activity in the future. See “—Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your notes.” Payment deferrals or extensions or delays in initiating repossession activity may extend the maturity of the receivables, increase the weighted average life of any class of notes and reduce the yield on your notes.

In addition, the servicer’s customary servicing practices may change from time to time and those changes could reduce collections on the receivables. Although the servicer’s customary servicing practices at any time will apply to all receivables serviced by the servicer, without regard to whether a receivable has been sold to the issuing entity, the servicer is not obligated to maximize collections from the receivables. Consequently, the manner in which the servicer exercises its servicing discretion or changes its customary practices could have an impact on the amount and timing of collections on the receivables, which may impact the amount and timing of funds available to make payments on the notes.

Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables.

A credit score purports only to be a measurement of the relative degree of risk a borrower represents to a lender, i.e. that a borrower with a higher score is statistically expected to be less likely to default on its payment obligations than a borrower with a lower score. SC developed its proprietary loan funded scoring model (formerly known as the loss forecasting scoring model) to try to assess the probability that a receivable will default based on the sponsor’s proprietary methods, and the range of scores for SC’s proprietary loan funded scoring system is not comparable to the credit bureau scores presented in this prospectus. Further, SC’s proprietary loan funded scoring model was built prior to the global outbreak of COVID-19; accordingly, the data used to develop the model may not reflect current economic conditions, and the model was not designed to take into account the longer-term impacts of social, economic and financial disruptions caused by the pandemic or other social, economic and financial conditions that differ significantly from those that prevailed at the inception or most recent refinement of the model. From time to time, the sponsor has refined and in the future may further refine its scoring model. Credit scores, including the credit score data presented in this prospectus, do not account for changes in obligors’ credit profiles subsequent to the date as of which such scores are obtained or calculated. Consequently, information regarding credit scores and

 

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loan funded scores for the receivables in the pool presented in “The Receivables Pool” should not be relied upon as a basis for an expectation that a receivable will be paid in accordance with its terms.

Historical loss and delinquency information set forth in this prospectus under “The Receivables Pool” was affected by several variables, including general economic conditions and market interest rates, that are expected to differ in the immediate future, and are likely to differ in the longer term future. Consequently, the net loss experience calculated and presented in this prospectus with respect to the sponsor’s managed portfolio of contracts may not reflect actual experience with respect to the receivables in the receivables pool. The sponsor has experienced variability (including increases) in delinquencies and repossessions on its auto loan portfolio, which variability may continue (including as a result of the COVID-19 outbreak). Further, the prices of used vehicles, including the prices at which the servicer is able to sell repossessed vehicles, are variable, and declines in used vehicle prices will result in increased credit losses on defaulted receivables. In addition, future delinquency rates, rates of repossession, recovery rates on repossessed vehicles or loss experience of the servicer with respect to the receivables may be better or worse than that set forth in the static pool information and historical delinquency and loss information contained in this prospectus.

In addition, the servicer’s customary servicing practices have changed over time and may change from time to time in the future, and those changes could reduce collections on the receivables. As a result, the delinquency and credit loss experience presented in this prospectus with respect to the sponsor’s managed portfolio of auto receivables or the static pool information may not reflect actual experience with respect to the receivables in the receivables pool. If the performance of the receivables in the receivables pool is worse than expected, the timing and amount of payments on the notes could be adversely affected.

Recent and future economic developments may adversely affect the performance of the receivables and may result in reduced or delayed payments on your notes.

A deterioration in economic conditions and certain economic factors, such as reduced business activity, high unemployment, interest rates, housing prices, energy prices (including the price of gasoline), increased consumer indebtedness (including of obligors on the receivables), lack of available credit, the rate of inflation (such as the recent increase in inflation) and consumer perceptions of the economy, as well as other factors, such as terrorist events, civil unrest, cyber-attacks, public health emergencies, extreme weather conditions or significant changes in the political environment (such as the ongoing military conflict between Ukraine and Russia) and/or public policy, including increased state, local or federal taxation, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables. The issuing entity’s ability to make payments on the notes could be adversely affected if obligors were unable to make timely payments or if the servicer elected to, or was required to, implement forbearance programs in connection with obligors suffering a hardship (including hardships related to the COVID-19 pandemic).

The United States experienced a recession as a result of the outbreak of COVID-19 and the outlook for the U.S. economy remains uncertain, which may adversely affect the performance of the receivables and the performance and market value of your notes. See “—Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your notes.” Periods of economic slowdown or recession are often characterized by high unemployment and diminished availability of credit, generally resulting in increases in delinquencies, defaults, repossessions and losses on automobile loans.

Further, periods of economic slowdown may also be accompanied by temporary or prolonged decreased consumer demand for motor vehicles and declining used vehicle prices. Significant increases in the inventory of used vehicles during periods of economic slowdown or recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales.

All of these factors could result in reduced or delayed payments on your notes. If an economic downturn is experienced for a prolonged period of time, it is expected that delinquencies will increase and losses on the receivables could increase, which could result in losses on your notes. An improvement in economic conditions could result in prepayments by the obligors of their payment obligations under the receivables, either because obligors elect to make payments more frequently or in larger-than-required amounts or because obligors sell the financed vehicles more frequently in connection with the purchase of new vehicles. As a result, you may receive principal payments of your notes earlier than anticipated, which could reduce the return on your notes.

 

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The application of the Servicemembers Civil Relief Act may lead to delays in payment or losses on your notes.

The Servicemembers Civil Relief Act and similar state legislation may limit the interest payable on a receivable during an obligor’s period of active military duty. This legislation, together with the servicer’s policies developed to comply with such legislation, as well as give additional benefits to active military personnel (and, in some circumstances, their family members and certain other related parties, even where not required by law), could adversely affect the ability or willingness of the servicer to collect full amounts of interest on a receivable, as well as limit the ability or willingness to repossess the financed vehicle related to an affected receivable during and, for a certain time after, the obligor’s period of active military duty. These laws and the servicer’s policies may thus result in delays and losses in payments to holders of the notes. See “Material Legal Aspects of the Receivables—Servicemembers Civil Relief Act” in this prospectus.

Failure to comply with consumer protection laws may result in losses on your investment.

Federal and state consumer protection laws regulate the creation, collection and enforcement of consumer contracts such as the receivables. These laws impose specific statutory liabilities upon creditors who fail to comply with the provisions of these laws. Additionally, the CARES Act (as defined below) includes various provisions, such as new requirements affecting credit reporting, designed to protect consumers. Although the liability of the issuing entity to the obligor for violations of applicable federal and state consumer laws may be limited, these laws may make an assignee of a receivable, such as the issuing entity, liable to the obligor for any violation by the lender or may affect the issuing entity’s ability to enforce its rights to collect under the receivable or to repossess the related financed vehicle. The sponsor may be obligated to repurchase from the issuing entity any receivable that fails to comply with federal and state consumer protection laws. To the extent that the sponsor fails to make (or is not required to make) such a repurchase, or to the extent that a court holds the issuing entity liable for violating consumer protection laws regardless of such a repurchase, a failure to comply with consumer protection laws could result in required payments by the issuing entity. For a discussion of federal and state consumer protection laws which may affect the receivables, you should refer to “Material Legal Aspects of the Receivables—Consumer Protection Laws” in this prospectus.

THE ISSUING ENTITY HAS LIMITED ASSETS, AND DELAYS IN PAYMENT OR LOSSES ON YOUR NOTES COULD ARISE FROM SHORTFALLS OR DELAYS IN AMOUNTS AVAILABLE TO MAKE PAYMENTS ON THE NOTES.

You must rely for repayment only upon the issuing entity’s assets, which may not be sufficient to make full payments on your notes.

Your notes are secured solely by the assets of the issuing entity. The sponsor, the servicer and the depositor are not obligated to make any payments to you on your notes and do not guarantee payments on the receivables. Further, neither the notes nor the receivables will be insured or guaranteed by the United States or any governmental entity. Distributions on any class of notes will depend solely on the amount and timing of payments and other collections in respect of the receivables and distributions from the reserve account. These amounts, together with other payments and collections in respect of the receivables, may not be sufficient to make full and timely distributions on your notes. If delinquencies and losses create shortfalls which exceed the available credit enhancement, you may experience delays or reductions in payments on your notes and you could suffer a loss.

You may experience a loss or a delay in receiving payments on the notes if the assets of the issuing entity are liquidated.

If an event of default under the indenture occurs and the notes are accelerated, the indenture trustee may liquidate the assets of the issuing entity. As a result:

 

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you may suffer losses on your notes if the assets of the issuing entity are insufficient to pay the amounts owed on your notes;

 

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payments on your notes may be delayed until more senior classes of notes are repaid or until the liquidation of the assets is completed; and

 

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•

your notes may be repaid earlier than scheduled, which will involve the prepayment risks described under “—Certain features of the notes and financial market disruptions may adversely affect the return on your notes or the market value and liquidity of your notes—Returns on your investments may be reduced by prepayments on the receivables, events of default, optional redemption of the notes or repurchases of receivables from the issuing entity” in this prospectus.

The issuing entity cannot predict the length of time that will be required for liquidation of the assets of the issuing entity to be completed. In addition, liquidation proceeds may not be sufficient to repay the notes in full. Even if liquidation proceeds are sufficient to repay the notes in full, any liquidation that causes the outstanding principal amount of the notes to be paid before the related final scheduled payment date will involve the prepayment risks described above.

Repurchase obligations are limited, and do not protect the issuing entity from all risks that could impact the performance of the receivables.

The sponsor will make limited representations and warranties regarding the characteristics of the receivables to be transferred to the issuing entity. The sponsor will be obligated to repurchase from the issuing entity (as assignee of the depositor) a receivable if there is a breach of the representations or warranties regarding the eligibility of such receivable (and such breach is not cured and materially and adversely affects the interest of the issuing entity or the noteholders in such receivable). Additionally, SC, as servicer, will be obligated to repurchase a receivable from the issuing entity if the servicer makes certain modifications to the receivable or if the servicer breaches certain servicing covenants (and such breach is not cured and materially and adversely affects the interest of the issuing entity or the noteholders in such receivable). However, the representations and warranties made by the sponsor and the depositor are not a guarantee of performance and do not protect the issuing entity from all risks that could impact the performance of the receivables, including risks related to the outbreak of COVID-19. Further, the representations and warranties are made as of the cut-off date or closing date, as applicable, and are not ongoing representations or warranties with respect to the eligibility of the receivables. While the sponsor or servicer may be obligated to repurchase a receivable, the sponsor or servicer may not be financially in a position to fund its repurchase obligation and you could suffer a loss.

Interests of other persons in the receivables and financed vehicles could be superior to the interests of the issuing entity, which may result in losses on the receivables and reduced payments on your notes.

Generally, each receivable is secured at origination by the related financed vehicle. Although the receivables will be transferred to the issuing entity and pledged to the indenture trustee, the lien certificates or certificates of title relating to the financed vehicles securing the receivables will not be amended or reissued to identify the issuing entity as the new secured party. In the absence of an amendment or reissuance, the issuing entity may not have a perfected security interest in the financed vehicles securing the receivables in some states. Additionally, the issuing entity could lose the priority of its security interest in a financed vehicle due to, among other things, liens for repairs or storage of a financed vehicle or for unpaid taxes of an obligor. None of the servicer, the sponsor, or any other person will have any obligation to purchase or repurchase a receivable if liens for repairs or storage of a financed vehicle or for unpaid taxes of an obligor result in the loss of the priority of the security interest in the financed vehicle.

If the issuing entity has failed to obtain or maintain a perfected security interest in a financed vehicle, its security interest would be subordinate to, among others, a bankruptcy trustee of the obligor, a subsequent purchaser of the financed vehicle or a holder of a perfected security interest in the financed vehicle or a bankruptcy trustee of such holder. The servicer may not be able to repossess and liquidate a financed vehicle if the security interest in that vehicle created by the receivable is not perfected at the time of repossession, which could result in higher losses on defaulted receivables and reduced collections available to make payments on your notes. See “Material Legal Aspects of the Receivables—Security Interests in the Financed Vehicles” in this prospectus.

The servicer will maintain possession of the original contracts for each of the receivables in tangible form or “control” of the authoritative copies of the contracts in electronic form, and the original contracts and authoritative copies of electronic contracts will not be segregated or marked as belonging to the issuing entity. If the servicer sells or pledges the receivables and delivers the original contracts for the receivables to another party or permits another party to obtain control of the authoritative copies of the electronic contracts, in violation of its contractual

 

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obligations under the transaction documents, this party could acquire an interest in the receivable which may have priority over the issuing entity’s interest. The servicer could also lose possession or control of the contracts through fraud, forgery, negligence or error, or as a result of a computer virus or a hacker’s actions or otherwise (especially in a circumstance where the contracts are held in electronic form). Furthermore, if the servicer becomes the subject of an insolvency or receivership proceeding, competing claims to ownership or security interests in the receivables could arise. These claims, even if unsuccessful, could result in delays in payments on the notes. If successful, these claims could result in losses or delays in payment to you or an acceleration of the repayment of the notes.

The possibility that the issuing entity may not have a perfected security interest in the financed vehicles or in the receivables may affect the issuing entity’s ability to receive payments on the receivables or liquidation proceeds with respect to the financed vehicles. Therefore, you may be subject to delays in payment and may incur losses on your notes.

ADVERSE EVENTS AFFECTING THE SERVICER OR OTHER TRANSACTION PARTIES COULD RESULT IN LOSSES ON YOUR NOTES OR REDUCE THE MARKET VALUE OR LIQUIDITY OF YOUR NOTES.

Adverse events with respect to the sponsor, the servicer or their affiliates could affect the timing of payments on your notes or adversely affect the market value or liquidity of your notes.

Adverse events with respect to the sponsor, the servicer or any of their affiliates could result in servicing disruptions or affect the performance or market value of your notes and your ability to sell your notes in the secondary market. For example, servicing disruptions could result from unanticipated events beyond the servicer’s control, such as natural disasters, civil unrest, cyber-attacks, political instability, armed conflict (such as the military conflict between Ukraine and Russia), public health emergencies (including COVID-19 or similar outbreaks) and economic disruptions, particularly to the extent such events affect the servicer’s business or operations. For example, if significant portions of the servicer’s workforce are unable to work effectively as a result of the COVID-19 pandemic, including because of illness, stay-at-home orders, facility closures or ineffective remote work arrangements, there may be servicing disruptions, which could result in reduced collection effectiveness. Further, the failure of certain third parties that the servicer and sponsor rely on to deliver products and services to support their business to fully perform their obligations in a timely manner could adversely impact the servicer’s or sponsor’s ability to operate its business or perform their respective obligations under the transaction documents or could cause a disruption in collection activities with respect to the receivables owned by the issuing entity. See “—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your notes.” In addition, in the event of a termination and replacement of the servicer, there may be some disruption of the collection activity with respect to the receivables owned by the issuing entity, leading to increased delinquencies, defaults and losses on the receivables. Any such disruptions may cause you to experience delays in payments or losses on your notes.

Further, the sponsor relies upon its ability to sell securities in the asset-backed securities market and upon its ability to access various credit facilities to fund its operations. As discussed under “—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Adverse events arising from the global Coronavirus outbreak could result in delays in payment or losses on your notes,” the global credit and financial markets have recently experienced, and may continue to experience, significant disruption and volatility. If the sponsor’s access to funding is reduced or if the sponsor’s costs to obtain such funding significantly increases, the sponsor’s business, financial condition and results of operations could be materially and adversely affected which could adversely affect the sponsor’s ability to perform its obligations under the transaction documents, including as servicer.

Additionally, the ability of the servicer to perform its obligations under the transaction documents will depend, in part, on its ability to store, retrieve, process and manage substantial amounts of information. If the servicer experiences any interruptions or losses in its information processing capabilities, including due to attacks by hackers, computer viruses or breaches due to errors or malfeasance by employees, contractors or others who have access to its system and networks, its business, financial conditions or results of operations and its ability to perform its obligations under the transaction documents (including servicing the receivables) may be materially adversely affected. In particular, many companies (including the servicer) have seen an increase in the number and range of cyber-attacks, which, if successful, could give rise to the loss of significant amounts of sensitive information and the

 

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disablement of the information technology systems used to service obligors on the receivables and other customers. The servicer may incur significant costs in attempting to protect against such attacks or remediate any vulnerability or resulting breach. If the servicer fails to effectively manage the cyber-security risk or is required to devote significant resources towards doing so, this could materially and adversely affect its business, financial condition and results of operation, as well as its ability to service the receivables, resulting in an increased risk of loss on the notes.

The sponsor is party to various lawsuits pending in federal and state courts alleging violations of state and federal consumer lending laws, including, without limitation, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, Section 5 of the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Truth in Lending Act, wrongful repossession laws, usury laws and laws related to unfair and deceptive acts or practices. In general, these cases seek damages and equitable and/or other relief. The sponsor is also party to, or is periodically otherwise involved in, reviews, investigations, examinations and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the Board of Governors of the Federal Reserve System, the CFPB (as defined below), the U.S. Department of Justice, the SEC, the Federal Trade Commission and various state regulatory and enforcement agencies. Investigations, litigation, regulatory proceedings and/or information-gathering requests that the sponsor or any of its subsidiaries or affiliates are involved in, or may become involved in, have resulted in and may in the future result in (individually or in the aggregate) adverse consequences to the sponsor including, without limitation, adverse judgments, settlements, fines, penalties, injunctions, or other actions and may affect the ability of the sponsor or any of its subsidiaries or affiliates to perform their respective duties under the transaction documents.

Furthermore, if the servicer becomes the subject of an insolvency proceeding, competing claims to ownership or security interests in the receivables could arise. These claims, even if unsuccessful, could result in delays in payments on the notes. If successful, the attempt could result in losses or delays in payments to you or an acceleration of the repayment of the notes. See “—Bankruptcy of SC, the originator or the depositor could result in delays in payments or losses on your notes” below.

Federal or state regulatory reform could have a significant impact on the servicer, the sponsor, the depositor or the issuing entity and could adversely affect the timing and amount of payments on your notes.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act is extensive and significant legislation that, among other things, created a framework for the liquidation of certain bank holding companies and other nonbank financial companies and certain of their subsidiaries in the event such a company is in default or in danger of default and the resolution of such a company under other applicable law would have serious adverse effects on financial stability in the United States, and created the Bureau of Consumer Financial Protection, known as the Consumer Financial Protection Bureau (the “CFPB”), an agency responsible for, among other things, administering and enforcing the laws and regulations for consumer financial products and services and conducting examinations of large banks and their affiliates for purposes of assessing compliance with the requirements of consumer financial laws.

The Dodd-Frank Act impacts the offering, marketing and regulation of consumer financial products and services offered by financial institutions. The CFPB has supervision, examination and enforcement authority over the consumer financial products and services of certain non-depository institutions and large insured depository institutions and their respective affiliates. See “Material Legal Aspects of the Receivables—Consumer Financial Protection Bureau” in this prospectus.

Compliance with the implementing regulations under the Dodd-Frank Act and the oversight of the SEC, CFPB or other government entities, as applicable, has imposed costs on, created operational constraints for, and placed limits on pricing of consumer products with respect to finance companies such as the sponsor. Because of the complexity of the Dodd-Frank Act, the ultimate impact of the Dodd-Frank Act and its effects on the financial markets and their participants will not be fully known for an extended period of time. Therefore, requirements imposed by the Dodd-Frank Act may have a significant future impact on the servicing of the receivables, or on the regulation and supervision of the servicer, the sponsor, the depositor, the issuing entity and/or their respective affiliates.

The CFPB has successfully asserted the power to investigate and bring enforcement actions directly against securitization vehicles. On December 13, 2021, in an action brought by the CFPB, the U.S. District Court for the

 

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District of Delaware denied a motion to dismiss filed by a securitization trust by holding that the trust is a “covered person” under the Dodd-Frank Act because it engages in the servicing of loans, even if through servicers and subservicers. CFPB v. Nat’l Collegiate Master Student Loan Trust, No. 1:17-cv-1323-SB (D. Del.). On February 11, 2022, the district court granted the defendant trusts’ motion to certify that order for an immediate interlocutory appeal and stayed the case pending resolution of any appeal. The Third Circuit Court of Appeals has granted the defendant trusts’ petition for an interlocutory appeal. Depending upon the outcome of the appeal, the CFPB may rely on this decision as precedent in investigating and bringing enforcement actions against other trusts, including the issuing entity, in the future.

The CFPB also recently issued a Compliance Bulletin stating its position that automobile loan holders and servicers are responsible for ensuring that their repossession-related practices, and the practices of their service providers, do not violate the law, and the CFPB also described its intention to hold loan holders and servicers liable for unfair, deceptive, or abusive acts or practices related to the repossession of automobiles. It is possible that the CFPB may bring enforcement actions against securitization trusts holding automobile retail sale installment sale contracts, such as the issuing entity, and servicers in the future.

In addition, the framework for the liquidation of “covered financial companies” or their “covered subsidiaries” may apply to the sponsor or its nonbank affiliates, the issuing entity or the depositor, and, if it were to apply, may result in a repudiation of any of the transaction documents where further performance is required or an automatic stay or similar power preventing the indenture trustee or other transaction parties from exercising their rights. This repudiation power could also affect certain transfers of receivables pursuant to the transaction documents as further described under “Material Legal Aspects of the Receivables—Dodd-Frank Orderly Liquidation Framework—FDIC’s Repudiation Power under OLA” in this prospectus. Application of this framework could materially adversely affect the timing and amount of payments of principal and interest on your notes.

In particular, the Federal Trade Commission (the “FTC”) and state attorneys general have recently increased their scrutiny of motor vehicle dealers and auto lending, particularly with respect to antidiscrimination and deception concerns related to the prices of, and fees charged in connection with, automobile financing, including add-on products such as GAP insurance and extended warranties. Also, on June 23, 2022, the FTC issued a proposed rule that would (i) prohibit motor vehicle dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing for motor vehicles, (ii) require accurate pricing disclosures in dealers’ advertising and sales discussions, (iii) require dealers to obtain consumers’ express, informed consent for charges, (iv) prohibit the sale of any add-on product or service that confers no benefit to the consumer, and (v) require dealers to keep records of advertisements and customer transactions. At this stage, it is unknown whether a final rule will be issued, the exact requirements of any final rule if issued or if any final rule would have a broader potential impact on auto lending practices, including the auto lending practices of SC.

On March 25, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), was signed into law. The CARES Act provided for the creation of the Federal Pandemic Unemployment Compensation program, which provided an additional $600 per week to individuals collecting traditional unemployment compensation through the end of 2020. In addition, the Consolidated Appropriations Act of 2021 (the “Appropriations Act”), which was signed into law on December 27, 2020, restored the Federal Pandemic Unemployment Compensation program through March 14, 2021. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law and extended unemployment benefits through September 6, 2021 (though some states discontinued the additional federal unemployment benefits earlier) and provided stimulus checks to certain individuals and families up to $1,400 per adult and eligible dependent. It is not known how many obligors of the receivables may have been receiving, or may in the future receive, any such additional unemployment benefits, or what the effect of any reduction of such benefits may be on the ability of the obligors to meet their payment obligations under the receivables and, consequently, what impact such benefits have had on recent historical loss and delinquency information and static pool experience or what impact such benefits may have on the loss and delinquency performance of the receivables in the receivables pool.

Further, changes to the regulatory framework in which SC operates, including, for example, laws or regulations enacted to address the potential impacts of climate change (including laws which may adversely impact the auto industry in particular as a result of efforts to mitigate the factors contributing to climate change) or laws, regulations, executive orders or other guidance in response to the COVID-19 pandemic could have a significant impact on the

 

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servicer, the sponsor, the depositor or the issuing entity and could adversely affect the timing and amount of payments on your notes.

Bankruptcy of SC, the originator or the depositor could result in delays in payments or losses on your notes.

Following a bankruptcy or insolvency of SC, the originator or the depositor, a court could conclude that the receivables are owned by SC, the originator or the depositor, respectively, instead of the issuing entity. This conclusion could be because the court found that any transfer of the receivables was not a true sale or because the court found that the originator, the depositor or the issuing entity should be treated as the same entity as SC or the depositor for bankruptcy purposes. If this were to occur, you could experience delays in payments due to you or you may not ultimately receive all amounts due to you as a result of:

 

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the automatic stay, which prevents a secured creditor from exercising remedies against a debtor in a bankruptcy without permission from the court, and provisions of the United States Bankruptcy Code that permit substitution of collateral in limited circumstances;

 

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tax or government liens on SC’s, the originator’s or the depositor’s property (that arose prior to the transfer of the receivables to the issuing entity) having a prior claim on collections before the collections are used to make payments on the notes; or

 

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the fact that the issuing entity and the indenture trustee may not have a perfected security interest in any cash collections of the receivables held by the servicer at the time that a bankruptcy proceeding begins.

Commingling of assets by the servicer could reduce or delay payments on the notes.

Subject to the satisfaction of certain requirements, the servicer will not be required to deposit collections into the collection account until the business day prior to the day on which the funds are needed to make the required distributions to noteholders as further described under “The Transfer Agreements and the Administration Agreement—Deposits to the Collection Account” in this prospectus. If such requirements are satisfied, the servicer will also deposit the aggregate purchase price of any receivables purchased by it into the collection account on the same date. Until these funds have been deposited into the collection account, the servicer may use and invest these funds at its own risk and for its own benefit and will not segregate them from its own funds. If the servicer were unable to remit such funds or if the servicer were to become a debtor under any insolvency laws, delays or reductions in distributions to noteholders may occur.

You may experience delays or reduction in payments on your notes following a servicer replacement event and replacement of the servicer.

Upon the occurrence of a servicer replacement event, the indenture trustee, at the direction of holders of notes evidencing not less than a majority of the outstanding principal amount of the notes of the Controlling Class, will terminate the servicer. It may be expensive to transfer servicing to a successor servicer and a successor servicer may not be able to service the receivables with the same degree of skill as the servicer. In addition, during the pendency of any servicing transfer or for some time thereafter, obligors may delay making their monthly payments or may inadvertently continue making payments to the predecessor servicer, potentially resulting in losses or delays in payments on the notes. Delays in payments on the notes and possible reductions in the amount of such payments could occur with respect to any cash collections held by the servicer at the time that the servicer becomes the subject of a bankruptcy or similar proceeding.

Because the servicing fee is structured as a percentage of the aggregate principal balance of the receivables, the fee the servicer receives each month will be reduced as the size of the pool of receivables decreases over time. At some point, the amount of the servicing fee payable to the servicer may be considered insufficient by a potential replacement servicer and it may be difficult to find a replacement servicer. Consequently, the time it takes to effect the transfer of servicing to a replacement servicer or the inability to locate a replacement servicer may result in the disruption of normal servicing activities, increased delinquencies and defaults on the receivables and delays or reductions in payments on your notes.

 

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THE ISSUING ENTITY HAS ISSUED MULTIPLE CLASSES OF NOTES, AND YOUR NOTES MAY BE MORE SENSITIVE TO LOSSES, BE AFFECTED BY CONFLICTS OF INTEREST BETWEEN CLASSES AND HAVE REDUCED LIQUIDITY OR VOTING POWER BECAUSE OF AN UNKNOWN RETENTION OF NOTES.

Subordination of all classes of notes other than the Class A notes means that those classes are more sensitive to losses on the receivables and your share of losses may not be proportional.

As described under “The Notes—Payments of Principal”, principal payments on the notes generally will be made to the holders of the notes sequentially so that no principal will be paid on any class of notes until each class of notes with an earlier final scheduled payment date has been paid in full. Additionally, after an event of default and acceleration of the notes, principal and interest on more senior classes will generally be paid prior to principal and interest on more junior classes of notes. As a result, a class of notes having a later final scheduled payment date is more likely to suffer the consequences of delinquent payments and defaults on the receivables than the classes of notes having an earlier final scheduled payment date.

Additionally, if there are insufficient amounts available to pay all classes of notes the amounts they are owed on any payment date or following an acceleration of the notes, delays in payments or losses will be suffered by the most junior outstanding class or classes of notes even as payment is made in full to more senior classes of notes.

There may be a conflict of interest among classes of notes.

As described elsewhere in this prospectus, the holders of the most senior class of notes then outstanding will make certain decisions with regard to treatment of defaults by the servicer, acceleration of payments on the notes following an event of a default under the indenture and certain other matters, such as a sale of the collateral after an event of default under some circumstances. See “The Indenture—Rights Upon Event of Default” in this prospectus. Because the holders of more senior classes of notes will have different interests than holders of more junior classes of notes when it comes to these matters, you may find that courses of action determined by other noteholders do not reflect your interests but that you are nonetheless bound by the decisions of these other noteholders.

The failure to pay interest on the subordinated classes of notes is not an event of default, and the failure to make principal payments on any notes will generally not result in an event of default until the applicable final scheduled payment date.

The indenture provides that failure to pay interest when due on the outstanding subordinated class or classes of notes — for example, for so long as any of the Class A notes are outstanding, the Class B notes, the Class C notes and the Class D notes — will not be an event of default under the indenture. Under these circumstances, the holders of the subordinated classes of notes which are not the Controlling Class will not have any right to declare an event of default, to cause the maturity of the notes to be accelerated or to direct or consent to any remedial action under the indenture.

The amount of principal required to be paid to investors prior to the applicable final scheduled payment date set forth in this prospectus generally will be limited to amounts available for that purpose. Therefore, the failure to pay principal of a note generally will not result in an event of default under the indenture until the applicable final scheduled payment date or redemption date for the related class of notes.

The market value, liquidity and voting power of your notes may be adversely impacted by retention of notes by the depositor or its affiliates or by the unknown aggregate initial principal amount of the notes.

The Class A-1 notes and the Class D notes will be retained and some or all of one or more other classes of notes may be retained by the depositor or an affiliate of the depositor. Accordingly, the market for such a retained class of notes may be less liquid than would otherwise be the case. In addition, if any retained notes are subsequently sold in the secondary market, demand and market price for notes already in the market could be adversely affected and the voting power of the noteholders of the outstanding notes may be diluted.

Whether the issuing entity will issue the Base Transaction or the Upsize Transaction is not expected to be known until the day of pricing. SC will make the determination regarding the aggregate initial principal amount of the notes based on, among other considerations, market conditions at the time of pricing. The size of a class of notes may

 

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affect liquidity of that class, with smaller classes being less liquid than a larger class may be. In addition, if your class of notes is larger than you expected, then you will hold a smaller percentage of that class of notes and the voting power of your notes will be diluted.

CERTAIN FEATURES OF THE NOTES AND FINANCIAL MARKET DISRUPTIONS MAY ADVERSELY AFFECT THE RETURN ON YOUR NOTES OR THE MARKET VALUE AND LIQUIDITY OF YOUR NOTES.

The ratings of the notes may be withdrawn or lowered, the notes may receive an unsolicited rating or the rating agencies may be perceived as having a conflict of interest, which may have an adverse effect on the liquidity or the market price of the notes.

Security ratings are not recommendations to buy, sell or hold the notes. Rather, ratings are an assessment by the applicable rating agency of the likelihood that any interest on a class of notes will be paid on a timely basis and that a class of notes will be paid in full by the final scheduled payment date for that class of notes. A rating agency may revise or withdraw its ratings at any time in its sole discretion, and the ratings of any notes may be lowered by a rating agency (including the Hired Agencies) following the initial issuance of the notes, including as a result of losses on the receivables in excess of the levels contemplated by a rating agency at the time of its initial rating analysis or due to general adverse trends in the economy. Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to take any action to maintain any ratings of the notes. If any rating with respect to the notes is revised or withdrawn, the liquidity or the market value of your notes may be adversely affected.

In March 2020, it was announced that certain classes of subordinate notes issued in certain previous securitization transactions sponsored by the sponsor were placed under review for downgrade by certain of the rating agencies hired to rate those notes. The ratings on all such classes were subsequently confirmed. Notes issued in connection with an asset-backed securitization program sponsored by the sponsor may be placed under review for downgrade or may be downgraded at any time by certain or all of the rating agencies hired to rate those notes.

It is possible that, on, prior to or after the closing date, a rating agency not hired by the sponsor to rate the transaction or a particular class of notes may provide an unsolicited rating that differs from (or is lower than) the ratings provided by the Hired Agencies. None of the sponsor, the depositor or any underwriter is obligated to inform investors (or potential investors) in the notes if an unsolicited rating is issued after the date of this prospectus and you should consult with your financial and legal advisors regarding the impact of an unsolicited rating on any class of notes. If any non-hired rating agency provides an unsolicited rating that differs from (or is lower than) the rating provided by the Hired Agencies, the liquidity or the market value of your notes may be adversely affected.

Further, it may be perceived that the Hired Agencies have a conflict of interest that may have affected the ratings assigned to the notes where, as is the industry standard and the case with the ratings of the notes, the sponsor, the depositor or the issuing entity pays the fees charged by the Hired Agencies for their rating services. The perceived conflict of interest may have an adverse effect on the market value of your notes and the ability to resell your notes.

Returns on your investments may be reduced by prepayments on the receivables, events of default, optional redemption of the notes or repurchases of receivables from the issuing entity.

You may receive payments on your notes earlier or later than you expected, which may adversely affect your ability to reinvest amounts paid to you at a rate of return that is equal to or greater than the rate of return on your notes. The notes are not a suitable investment for you if you require a regular or predictable schedule of payments or payment on any specific date.

The amount of distributions of principal of your notes and the time when you receive those distributions depend in part on the amount in which and times at which obligors make principal payments on the receivables. Those principal payments may be regularly scheduled payments or unscheduled payments resulting from prepayments (including as a result of refinancing) or defaults of the receivables. Additionally, if the sponsor or the servicer is required to repurchase receivables from the issuing entity because of a breach of an applicable representation, warranty or covenant as described under “The Transfer Agreements and the Administration Agreement—Collection, Extensions and Modifications of Receivables” and “The Transfer Agreements and the Administration Agreement—Representations and Warranties,” payment of principal on the notes will be accelerated.

 

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Additionally, the occurrence of an optional redemption event or events of default resulting in acceleration of the notes may result in repayment of the notes prior to the final scheduled payment date for one or more classes of notes. If the receivables are sold upon exercise of a “clean-up call” by the servicer, the issuing entity will redeem the notes then outstanding and you will receive the remaining principal amount of your notes plus accrued interest through the related payment date. Because your notes will no longer be outstanding, you will not receive the additional interest payments or other distributions that you would have received had the notes remained outstanding. You will bear the risk that the timing and amount of distributions on your notes will prevent you from attaining your desired yield. If you bought your notes at a premium, your yield to maturity will be lower than it would have been if the optional redemption had not been exercised. See “The Transfer Agreements and the Administration Agreement—Optional Redemption” in this prospectus.

Financial market disruptions, including as a result of the UK’s exit from the European Union, and the absence of a secondary market for the notes could limit your ability to resell your notes.

The securities will not be listed on any securities exchange. If you want to sell your notes you must locate a purchaser that is willing to purchase those notes. The underwriters intend to make a secondary market for the offered notes. The underwriters will do so by offering to buy the offered notes from investors that wish to sell. However, the underwriters will not be obligated to make offers to buy the offered notes or otherwise make a market for any class of notes, and may stop making offers at any time. In addition, the underwriters and other broker dealers may be unable, unwilling or restricted from making a market in, or publishing quotations on, the offered notes due to regulatory requirements or otherwise. A market for the offered notes may not develop, or if one does develop, it may not continue or provide sufficient liquidity. In addition, the prices offered, if any, may not reflect prices that other potential purchasers would be willing to pay, were they to be given the opportunity. In addition, because the offered notes will be in book-entry form, this may reduce their liquidity in the secondary market since certain potential investors may be unwilling to purchase notes for which they cannot obtain physical notes.

Additionally, events in the domestic and global financial markets (including rising inflation and potential instability and volatility as a result of the exit of the UK from the European Union (the “EU”)) could affect the performance or market value of your notes and your ability to sell your notes in the secondary market. Recent and continuing events in such markets have caused, and may again cause, a significant reduction in liquidity in the secondary market for asset-backed securities. In particular, asset-backed securities backed by sub-prime receivables and asset-backed securities in the form of subordinate notes have experienced reduced liquidity. Such illiquidity can have a severely adverse effect on the prices of securities that are especially sensitive to prepayment, credit or interest rate risk, such as the notes. As a result, you may not be able to sell your notes when you want to do so or you may not be able to obtain the price that you wish to receive.

 

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USE OF PROCEEDS

The depositor will use the net proceeds from the offering of the notes to:

 

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purchase the receivables from SC; and

 

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make the initial deposit into the reserve account.

The depositor or its affiliates will also use a portion of the net proceeds of the offering of the notes to pay their respective debts, including warehouse debt secured by the receivables prior to their transfer to the issuing entity, and for general purposes. Any such debt may be owed to the owner trustee, the indenture trustee or to one or more of the underwriters or their affiliates or entities for which their respective affiliates act as administrator and/or provide liquidity lines. Affiliates of the depositor currently obtain warehouse funding from one or more of the underwriters and from the indenture trustee (or from their respective affiliates), so a portion of the proceeds that are used to pay warehouse debt will be paid to the underwriters, the indenture trustee, and/or their respective affiliates.

THE ISSUING ENTITY

Limited Purpose and Limited Assets

Santander Drive Auto Receivables Trust 2022-5 is a statutory trust formed on May 2, 2022 under the laws of the State of Delaware for the purpose of owning receivables and issuing notes. The issuing entity will be operated pursuant to a trust agreement. SC will be the administrator of the issuing entity. The issuing entity will also issue one or more non-interest bearing certificates in a nominal aggregate principal amount of $100,000 representing the beneficial interest in the issuing entity, which are subordinated to the notes. Only the notes (other than the Class A-1 notes and the Class D notes) are being offered hereby, but the depositor may transfer all or a portion of the Class A-1 notes and the Class D notes or the certificates to an affiliate or sell all or a portion of the Class A-1 notes and the Class D notes or the certificates on or after the closing date. However, the portion of the certificates retained by the depositor or another majority-owned affiliate of SC to satisfy U.S. credit risk retention rules and for purposes of the SR Rules will not be sold, transferred, subjected to any credit risk mitigation or hedged except as permitted under, or in accordance with, those rules. See “The Sponsor—U.S. Credit Risk Retention,” “—EU Securitization Regulation and UK Securitization Regulation” and “Legal Investment—Requirements for Certain EU and UK Regulated Persons and Affiliates.” On each payment date, the certificateholders will be entitled to any available funds remaining on that payment date after all deposits and distributions of higher priority have been made, as described in “The Transfer Agreements and the Administration Agreement—Priority of Payments” in this prospectus.

The issuing entity will engage in only the following activities:

 

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issuing the notes and the certificates;

 

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making payments on the notes and distributions on the certificates;

 

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selling, transferring and exchanging the notes and the certificates to the depositor;

 

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acquiring, holding and managing the receivables and other assets of the issuing entity;

 

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making deposits to and withdrawals, directly or indirectly, from the trust accounts;

 

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paying the organizational, start-up and transactional expenses of the issuing entity;

 

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pledging the receivables and other assets of the issuing entity pursuant to the indenture;

 

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entering into and performing its obligations under the transfer agreements; and

 

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taking any action necessary, suitable or convenient to fulfill the role of the issuing entity in connection with the foregoing activities or engaging in other activities as may be required in connection with conservation of the assets of the issuing entity and the making of payments on the notes and distributions on the certificates.

 

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The issuing entity’s principal offices are in Wilmington, Delaware, in care of Wilmington Trust, National Association, as owner trustee, at the address listed in “The Trustees—The Owner Trustee” below. The issuing entity’s fiscal year ends on December 31^st.

The issuing entity’s trust agreement, including its permissible activities, may be amended in accordance with the procedures described in “The Transfer Agreements and the Administration Agreement—Amendment Provisions” in this prospectus.

Capitalization and Liabilities of the Issuing Entity

If the Base Transaction is issued, the expected assets of the issuing entity as of the closing date will be as follows:

 

Receivables(1)		$	1,522,457,697.69
Reserve Account – Initial Balance(2)		$	15,224,576.98
(1) Pool Balance as of the cut-off date. (2) This amount may be adjusted upward. To be an amount not less than 1.00% of the Pool Balance as of the cut-off date.

If the Base Transaction is issued, the expected liabilities of the issuing entity as of the closing date will be as follows⁽¹⁾:

 

Class A-1 Asset Backed Notes(2)		$	196,000,000
Class A-2 Asset Backed Notes		$	350,000,000
Class A-3 Asset Backed Notes		$	298,960,000
Class B Asset Backed Notes		$	137,020,000
Class C Asset Backed Notes		$	163,660,000
Class D Asset Backed Notes(2)		$	169,760,000
Total		$	1,315,400,000
(1) All or a portion of one or more of the classes of notes offered hereby may be initially retained by the depositor or an affiliate thereof. (2) The Class A-1 notes and the Class D notes are not being offered hereby.

If the Upsize Transaction is issued, the expected assets of the issuing entity as of the closing date will be as follows:

 

Receivables(1)		$	2,214,921,522.87
Reserve Account – Initial Balance(2)		$	22,149,215.23
(1) Pool Balance as of the cut-off date. (2) This amount may be adjusted upward. To be an amount not less than 1.00% of the Pool Balance as of the cut-off date.

If the Upsize Transaction is issued, the expected liabilities of the issuing entity as of the closing date will be as follows⁽¹⁾:

 

Class A-1 Asset Backed Notes(2)		$	285,000,000
Class A-2 Asset Backed Notes		$	509,000,000
Class A-3 Asset Backed Notes		$	435,280,000
Class B Asset Backed Notes		$	199,340,000
Class C Asset Backed Notes		$	238,100,000
Class D Asset Backed Notes(2)		$	246,970,000
Total		$	1,913,690,000
(1) All or a portion of one or more of the classes of notes offered hereby may be initially retained by the depositor or an affiliate thereof. (2) The Class A-1 notes and the Class D notes are not being offered hereby.

 

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The Issuing Entity Property

The notes will be collateralized by the issuing entity property. The primary assets of the issuing entity will be the receivables, which are amounts owed by individuals under motor vehicle retail installment sale contracts and/or installment loans used to purchase motor vehicles or refinance existing contracts or loans secured by motor vehicles. Substantially all of the receivables are the obligations of obligors with credit histories that are below prime or otherwise considered “sub-prime”.

The issuing entity property will consist of all the right, title and interest of the issuing entity in and to:

 

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the receivables acquired by the issuing entity from the depositor on the closing date and payments made on the receivables after the cut-off date;

 

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the security interests in the financed vehicles and all certificates of title to those financed vehicles;

 

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all receivable files relating to the receivables including the related original motor vehicle retail installment sale contracts and/or installment loans and all certificates of title to the related financed vehicles;

 

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rights to any proceeds from (1) claims on any theft and physical damage insurance policy maintained by an obligor providing coverage against theft of or loss or damage to the related financed vehicle, (2) claims on any credit life or credit disability insurance maintained by an obligor in connection with any receivable or (3) refunds in connection with extended service agreements relating to receivables which become Defaulted Receivables after the cut-off date;

 

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any other property securing the receivables;

 

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rights to amounts on deposit in the reserve account, the collection account and any other account established pursuant to the indenture or sale and servicing agreement (other than the certificate distribution account) and all cash, investment property and other property from time to time credited thereto and all proceeds thereof;

 

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rights under the sale and servicing agreement, the administration agreement and the purchase agreement; and

 

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the proceeds of any and all of the above.

The issuing entity will pledge the issuing entity property to the indenture trustee under the indenture. For a description of the sale and transfer of the issuing entity property as well as the creation, perfection and priority status of the security interest in that property in favor of the issuing entity, see “The Transfer Agreements and the Administration Agreement—Sale and Assignment of Receivables.”

Prior to formation, the issuing entity will have no assets or obligations. After formation, the issuing entity will not engage in any activity other than acquiring and holding the related receivables and the issuing entity property, issuing the related securities, distributing payments in respect thereof and any other activities described in this prospectus and in the trust agreement of the issuing entity. The issuing entity will not acquire any receivables or assets other than the issuing entity property.

THE TRUSTEES

The Owner Trustee

Wilmington Trust, National Association (“WTNA”) — also referred to herein as the “owner trustee” — is a national banking association with trust powers incorporated under the federal laws of the United States. The owner trustee’s principal place of business is located at 1100 North Market Street, Wilmington, Delaware 19890. WTNA is an affiliate of Wilmington Trust Company and both WTNA and Wilmington Trust Company are subsidiaries of M&T Bank Corporation. Since 1998, Wilmington Trust Company has served as trustee in numerous asset-backed securities transactions involving auto receivables.

 

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WTNA is subject to various legal proceedings that arise from time to time in the ordinary course of business. WTNA does not believe that the ultimate resolution of any of these proceedings will have a materially adverse effect on its services as owner trustee.

WTNA has provided the above information and has not participated in the preparation of, and is not responsible for, any other information contained in this prospectus.

The owner trustee’s liability in connection with the issuance and sale of the notes is limited solely to the express obligations of the owner trustee set forth in the trust agreement. The depositor and its affiliates may maintain normal commercial banking or investment banking relations with the owner trustee and its affiliates. The owner trustee will be paid a fee, as described in “The Transfer Agreements and the Administration Agreement – Fees and Expenses” in this prospectus, and will be indemnified against specified losses, liabilities or expenses incurred by the owner trustee in connection with the transaction documents, in each case by the issuing entity to the extent of Available Funds available therefor, as described in “The Transfer Agreements and the Administration Agreement – Priority of Payments” in this prospectus. To the extent these fees and indemnification amounts are not paid by the issuing entity, they will be payable by the servicer.

Resignation or Removal of the Owner Trustee

The owner trustee may resign at any time, in which event the depositor and the administrator, acting jointly, will be obligated to appoint a successor owner trustee. The depositor and the administrator will remove the owner trustee if the owner trustee ceases to be eligible to continue as such under the trust agreement or if such owner trustee becomes insolvent or is otherwise incapable of acting. In such circumstances, the depositor and the administrator, acting jointly, will be obligated to appoint a successor owner trustee. Any resignation or removal of the owner trustee and appointment of a successor owner trustee does not become effective until acceptance of the appointment by the successor owner trustee for such issuing entity and payment of all fees, expenses and indemnities (including any attorneys’ fees and other legal costs and expenses incurred in connection with any petition for appointment of a successor owner trustee) owed to the outgoing owner trustee.

For a further description of the roles and responsibilities of the owner trustee, see “—Role of the Owner Trustee and Indenture Trustee” below. For a description of provisions governing the limitation of liability and indemnity provisions applicable to the owner trustee, see “The Transfer Agreements and the Administration Agreement—Indemnification of the Indenture Trustee and the Owner Trustee” in this prospectus.

The Indenture Trustee

The “indenture trustee” is Citibank, N.A. (“Citibank”), a national banking association and wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank performs as indenture trustee through the Agency and Trust line of business, a part of Issuer Services. Citibank has primary corporate trust offices located in both New York and London. Citibank is a leading provider of corporate trust services offering a full range of agency, fiduciary, tender and exchange, depositary and escrow services. As of the end of the second quarter of 2022, Citibank’s Agency and Trust group manages in excess of $8 trillion in fixed income and equity investments on behalf of over 3,000 corporations worldwide. Since 1987, Citibank Agency and Trust has provided corporate trust services for asset-backed securities containing pool assets consisting of airplane leases, auto loans and leases, boat loans, commercial loans, commodities, credit cards, durable goods, equipment leases, foreign securities, funding agreement backed note programs, truck loans, utilities, student loans and commercial and residential mortgages. As of the end of the second quarter of 2022, Citibank acts as indenture trustee and/or paying agent for approximately 235 various asset backed trusts supported by either auto loans or leases or equipment loans or leases.

The indenture trustee will make each monthly statement available to the noteholders via the indenture trustee’s internet website at www.sf.citidirect.com. For assistance with regard to this service, investors may call the indenture trustee’s corporate trust office at 1 (888) 855-9695.

 

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For a description of the provisions governing resignation and removal of the indenture trustee, see “The Indenture—Resignation or Removal of the Indenture Trustee” in this prospectus. For a description of provisions governing the limitation of liability and indemnity provisions applicable to the indenture trustee, see “The Transfer Agreements and the Administration Agreement—Indemnification of the Indenture Trustee and the Owner Trustee” in this prospectus.

For a further description of the roles and responsibilities of the indenture trustee, see “—Role of the Owner Trustee and Indenture Trustee” below.

Role of the Owner Trustee and Indenture Trustee

Neither the owner trustee nor the indenture trustee will make any representations as to the validity or sufficiency of the sale and servicing agreement, trust agreement, administration agreement, indenture, asset representations review agreement, the securities or any receivables or related documents. As of the closing date, neither the owner trustee nor the indenture trustee will have examined the receivables. If no event of default has occurred under the indenture, the owner trustee and indenture trustee will be required to perform only those duties specifically required of them under the sale and servicing agreement, trust agreement, administration agreement or indenture, as applicable. Generally, those duties are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the owner trustee or indenture trustee under the sale and servicing agreement, trust agreement, administration agreement, or indenture, as applicable, and the making of payments or distributions to noteholders and certificateholders in the amounts specified in certificates provided by the servicer.

The owner trustee will be under no obligation to exercise any of the issuing entity’s powers or powers vested in it by the sale and servicing agreement, trust agreement or indenture, or other related documents as applicable, or to make any investigation of matters arising thereunder or to institute, conduct or defend any investigation, proceeding or litigation thereunder or in relation thereto at the request, order or direction of any of the certificateholders, unless those certificateholders have offered to the owner trustee security or indemnity reasonably satisfactory to it against the reasonable costs, expenses and liabilities which may be incurred therein or thereby. Under no circumstances will the owner trustee be required to take, expend or risk its own funds or to take any action at the direction of the noteholders or certificateholders if it shall determine or be advised by counsel that such action is contrary to the transaction documents or applicable law.

The indenture trustee will be under no obligation to exercise any of the issuing entity’s powers or powers vested in it by the indenture or to make any investigation of matters arising thereunder or to institute, conduct or defend any investigation, proceeding or litigation thereunder or in relation thereto at the request, order or direction of any of the noteholders (other than requests, demands or directions relating to an asset representations review as described under “The Transfer Agreements and the Administration Agreement—Asset Representations Review” or to the investors’ rights to communicate with other investors described under “The Indenture— Noteholder Communication; List of Noteholders”), unless those noteholders have offered to the indenture trustee security or indemnity reasonably satisfactory to the indenture trustee against the reasonable costs, expenses and liabilities which may be incurred by it, its agents and its counsel in compliance with such request or direction (including any legal fees, costs and expenses incurred in connection with any enforcement (including any action, claim or suit) by the indenture trustee of any indemnification or other obligation of the noteholders).

The owner trustee and indenture trustee, and any of their affiliates, may hold securities in their own names. In addition, for the purpose of meeting the legal requirements of local jurisdictions or for the enforcement or conflict of interest matters, the owner trustee and indenture trustee, in some circumstances, acting jointly with the depositor or the administrator, respectively, will have the power to appoint co-trustees or separate trustees of all or any part of the issuing entity property. In the event of the appointment of a co-trustee, any rights, powers, duties and obligations of the owner trustee or indenture trustee under the transaction documents that are conferred upon the co-trustee will be exercised or performed by the co-trustee jointly, or, in any jurisdiction in which the owner trustee or indenture trustee is incompetent or unqualified to perform specified acts, singly by the co-trustee subject to applicable direction.

SC, the servicer and the depositor may maintain other banking relationships with the owner trustee and indenture trustee in the ordinary course of business.

 

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The owner trustee and indenture trustee will be entitled to certain fees and indemnities described under “The Transfer Agreements and the Administration Agreement—Fees and Expenses” in this prospectus.

THE DEPOSITOR

Santander Drive Auto Receivables LLC, a wholly-owned special purpose subsidiary of SC, is the depositor and was formed on February 23, 2006 as a Delaware limited liability company as Drive Auto Receivables LLC. On February 20, 2007, Drive Auto Receivables LLC changed its name to Santander Drive Auto Receivables LLC. The principal place of business of the depositor is at 1601 Elm Street, Suite 800, Dallas, Texas 75201. You may also reach the depositor by telephone at (214) 292-1930. The depositor was formed to purchase, accept capital contributions of or otherwise acquire motor vehicle retail installment sale contracts and motor vehicle loans; to own, hold, service, sell, assign, transfer, pledge, grant security interests in or otherwise exercise ownership rights with respect to receivables; to issue and sell one or more securities; to enter into and deliver any agreement which may be required or advisable to effect the administration or servicing of receivables or the issuance and sale of any securities, and to perform its obligations under each agreement to which it is a party; to establish any reserve account, spread account or other credit enhancement for the benefit of any securities issued by an issuing entity and to loan, transfer or otherwise invest any proceeds from receivables; to purchase financial guaranty insurance policies for the benefit of any security issued by an issuing entity, to enter into any interest rate or basic swap, cap, floor or collar agreements, currency exchange agreements or similar hedging transactions relating to any receivables or for the benefit of any security issued by an issuing entity and to prepare and file registration statements and prospectuses relating to notes to be offered and sold. The depositor’s limited liability company agreement limits the activities of the depositor to the foregoing purposes and to any activities incidental to and necessary for these purposes. Since its inception, the depositor has been engaged in these activities solely as (i) the transferee of contracts from SC pursuant to contribution or purchase agreements, (ii) the transferor of contracts to securitization trusts pursuant to sale and servicing agreements, (iii) the depositor that may form various securitization trusts pursuant to trust agreements and (iv) the entity that executes underwriting agreements and purchase agreements in connection with issuances of asset-backed securities.

THE SPONSOR

Santander Consumer USA Inc. (“SC”), an Illinois corporation, is the sponsor, and will also serve as the originator, the servicer, the administrator and the custodian with respect to the receivables. The principal place of business of SC is 1601 Elm Street, Suite 800, Dallas, Texas 75201. You may also reach SC by telephone at (214) 634-1110. SC and its predecessors have been engaged in the securitization of motor vehicle retail installment sale contracts since the first quarter of 1998 and have sponsored over 70 securitizations of auto contracts.

SC was incorporated on November 23, 1981 in the State of Illinois. SC is a wholly-owned subsidiary of Santander Consumer USA Holdings Inc., a Delaware corporation.

In 2013, SC and FCA US LLC (“Stellantis”), a subsidiary of Stellantis N.V., entered into a ten-year Master Private Label Financing Agreement (“MPLFA”) under which SC has been Stellantis’ preferred provider for consumer auto loans and leases and dealer loans. In April 2022, the MPLFA was extended to December 2025, updating certain terms that allow SC to serve in a complementary role to Stellantis’ recently launched captive finance company, Stellantis Financial Services US.

No securitization sponsored by SC has defaulted or experienced an early amortization triggering event. In some previous transactions that were fully insured as to principal and interest by bond insurers, there have been instances in which one or more receivable performance thresholds (relating to net losses, extensions and/or delinquencies) and/or financial covenants that were negotiated privately with insurers were exceeded. All consequences of exceeding those thresholds have been waived and/or cured and/or the triggers or covenants have been modified, in each case by the applicable bond insurer.

One of the underwriters is an affiliate of the sponsor.

 

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U.S. Credit Risk Retention

Pursuant to Regulation RR, SC is required to retain an economic interest in the credit risk of the receivables, either directly or through a majority-owned affiliate. SC intends to satisfy this obligation through the retention by one or more of its majority-owned affiliates of an “eligible horizontal residual interest” in an amount equal to at least 5% of the fair value, as of the closing date, of all of the notes and certificates to be issued by the issuing entity. The retained eligible horizontal residual interest will take the form of the issuing entity’s certificates.

SC determined the fair value of the notes and the issuing entity’s certificates in accordance with a fair value measurement framework under generally accepted accounting principles.

In measuring fair value, the use of observable and unobservable inputs and their significance in measuring fair value are reflected in a fair value hierarchy with the following three levels, where Level 1 is the highest priority because it is the most objective and Level 3 is the lowest priority because it is the most subjective:

Level 1: Fair value is calculated using observable inputs that reflect quoted prices for identical assets or liabilities in active markets;

Level 2: Fair value is calculated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly; and

Level 3: Fair value is calculated using unobservable inputs, such as the sponsor’s data.

SC believes that the fair value of the notes should be categorized within Level 2 of the fair value hierarchy assessment, reflecting the use of inputs derived from prices for similar instruments. SC believes that the fair market value of the issuing entity’s certificates should be categorized within Level 3 of the fair value hierarchy assessment, reflecting the use of significant unobservable inputs on key assumptions, including historical default rates and adjustments to reflect prepayment rates based on available data from comparable securitization transactions of similar assets, discount rates reflective of recent historical equity yields, and recovery rates based on the average severity utilizing reported severity rates and loss severity utilizing available market data from a comparable securitized pool.

For each pool of receivables, the fair value of each class of notes is assumed to be substantially equal to the initial principal amount of that class as set forth on the cover of this prospectus and interest is assumed to accrue on the notes consistent with the following ranges of per annum coupon rates: Class A-1 notes, 2.799% - 3.199%, Class A-2 notes, 4.10% - 4.50%, Class A-3 notes, 4.28% - 4.68%, Class B notes, 4.54% - 4.94%, Class C notes, 5.04% - 5.44% and Class D notes, 5.60% - 6.00%.

These interest rate ranges are estimated based on recent pricing of asset-backed notes secured by sub-prime motor vehicle receivables issued in similar securitization transactions.

To calculate the fair value of the issuing entity’s certificates, SC used a discounted cash flow method which uses the forecasted cash flows payable to the certificates and discounts the value of those cash flows to a present value using a rate intended to reflect a hypothetical market yield of the certificates. SC used an internal model to project future interest and principal payments on the receivables to be transferred to the issuing entity, the interest and principal payments on each class of notes, the servicing fee, transaction fees and expenses and deposits necessary to fund the reserve account to an amount equal to the specified reserve account balance. The resulting net cash flows to the certificates are discounted to their present value using an expected market yield which takes into account the first loss exposure of the certificates and the credit risks of the receivables.

In connection with the discounted cash flow calculation with respect to the certificates described above, SC made the following additional assumptions:

·             interest accrues on the notes at the rates described above;

·             the “clean-up call” option to redeem the notes will be exercised at the earliest opportunity;

 

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·             projected cash flows to the certificates are discounted at 18.00%;

·             interest and principal payments on the receivables are calculated using the hypothetical pools, assumed cut-off dates and related pool characteristics described under “Maturity and Prepayment Considerations”;

·             the receivables prepay in full at a 14.00% CRR based on amortization arising from prepayments, where “CRR” means the “Conditional Repayment Rate” and which represents the annualized expected rate of voluntary prepayments of principal as a percentage of the outstanding principal balance of the receivables and is one of the primary methodologies used to evaluate such expected voluntary prepayments; and

·             cumulative net losses on the receivables from the cut-off date through maturity of the receivables, as a percentage of the initial pool balance, equal 16.00%, and from the cut-off date through the optional redemption of the notes, as a percentage of the initial pool balance, equal 15.04% and occur each month at the following rates:

 

Month		Cumulative Net Loss		Month		Cumulative Net Loss		Month		Cumulative Net Loss
1		0.00%		18		6.12%		35		12.48%
2		0.00%		19		6.58%		36		12.75%
3		0.00%		20		7.05%		37		13.02%
4		0.00%		21		7.52%		38		13.28%
5		0.73%		22		7.98%		39		13.55%
6		1.13%		23		8.45%		40		13.82%
7		1.53%		24		8.92%		41		13.84%
8		1.93%		25		9.38%		42		13.98%
9		2.33%		26		9.85%		43		14.11%
10		2.73%		27		10.32%		44		14.24%
11		3.13%		28		10.78%		45		14.38%
12		3.53%		29		10.88%		46		14.51%
13		3.93%		30		11.15%		47		14.64%
14		4.33%		31		11.42%		48		14.78%
15		4.73%		32		11.68%		49		14.91%
16		5.13%		33		11.95%		50		15.04%
17		5.65%		34		12.22%

SC developed these inputs and assumptions by considering the following factors:

·             Discount rate applicable to the certificate cash flows – estimated to reflect the credit exposure to the residual cash flows, and derived taking into account the following qualitative factors: (i) the performance of prior securitized pools of receivables under the Santander Drive Auto Receivables Trust platform, (ii) structural features in the transaction that may impact the stability of certificate cash flows and (iii) the ratings assigned by the Hired Agencies to the most subordinate class of notes in the transaction;

·             CRR – estimated considering the composition of the pool of receivables and the performance of securitized pools of receivables in previous securitization transactions sponsored by SC under the Santander Drive Auto Receivables Trust platform; and

·             Cumulative net loss rate and cumulative net loss timing curve – developed considering SC’s internal loss expectations, the composition of the pool of receivables, the performance of prior securitized pools of receivables under the Santander Drive Auto Receivables Trust platform, trends in used vehicle values, economic conditions, and the cumulative net loss assumptions of the Hired Agencies. In determining the cumulative net loss rate and cumulative net loss timing curve, SC assumed:

 

·

a loss timing lag of 120 days, which is consistent with SC’s current charge-off policy whereby a receivable is charged-off no later than the month in which a payment became 120 days past due;

 

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·

(i) a loss severity for each defaulted receivable of 55.00%, which is the average loss severity of prior securitized pools under the Santander Drive Auto Receivables Trust platform and considers trends in, and future estimates of, used vehicle values and (ii) a recovery in the month after the month of charge-off, which is consistent with SC’s timing experience for the lag time between charge-off of a receivable and receipt of the related liquidation proceeds; and

 

·

a loss timing curve based on the shape of historical securitization transactions sponsored by SC under the Santander Drive Auto Receivables Trust platform, and taking into account the composition of the underlying pool of receivables compared to other securitized pools under the Santander Drive Auto Receivables Trust platform. See “The Receivables Pool—Information About Certain Previous Securitizations”.

Based upon the foregoing inputs and assumptions, (i) if the Base Transaction is issued, SC expects the entire portion of the issuing entity’s certificates and the notes to have a fair value of between $1,432,503,766 and $1,439,276,896 and the issuing entity’s certificates to have a fair value of between $117,103,766 and $123,876,896, which is between 8.17% and 8.61% of the fair value, as of the closing date, of all of the notes and certificates to be issued by the issuing entity, and (ii) if the Upsize Transaction is issued, SC expects the entire portion of the issuing entity’s certificates and the notes to have a fair value of between $2,084,321,609 and $2,094,173,524 and the issuing entity’s certificates to have a fair value of between $170,631,609 and $180,483,524, which is between 8.19% and 8.62% of the fair value, as of the closing date, of all of the notes and certificates to be issued by the issuing entity.

The portion of the issuing entity’s certificates being retained to satisfy the requirements of Regulation RR is expected to be (i) if the Base Transaction is issued, between 58.09% and 61.16% Percentage Interest in the issuing entity’s certificates, which SC expects to have a fair value of between $71,625,189 and $71,963,845, or (ii) if the Upsize Transaction is issued, between 58.02% and 61.08% Percentage Interest in the issuing entity’s certificates, which SC expects to have a fair value of between $104,216,081 and $104,708,677, which, in each case, is expected to be at least 5% of the expected fair value, as of the closing date, of all of the notes and certificates to be issued by the issuing entity. The fair values disclosed above are based on the inputs and assumptions described above. Further, the actual characteristics of the receivables to be transferred to the issuing entity on the closing date differ from the assumptions described above and the actual performance of the receivables is likely to differ from the assumed performance (such as the amount of cumulative net losses on the receivables). Consequently, the present value of the projected cash flows on the certificates is expected to vary from the discounted actual cash flows on the certificates, and you should not assume that the fair value of the issuing entity’s certificates will be equal to or greater than the present value of the actual cash flows on the certificates.

SC will recalculate the fair value of the notes and the issuing entity’s certificates following the closing date to reflect the issuance of the notes and any material changes in the methodology or inputs and assumptions described above. The fair value of the certificates as a percentage of the sum of the fair value of the notes and the certificates and as a dollar amount, in each case, as of the closing date, will be included in the first periodic report on Form 10-D filed by the depositor after the closing date, together with a description of any material changes in the method or inputs and assumptions used to calculate the fair value. Because all of the issuing entity’s certificates are expected to be retained by the depositor or another majority-owned affiliate of SC on the closing date, the first periodic report on Form 10-D filed by the depositor after the closing date will also disclose the portion of the issuing entity’s certificates being retained to satisfy the requirements of Regulation RR.

As described under “The Transfer Agreements and the Administration Agreement—Priority of Payments” and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration” below, distributions to holders of the issuing entity’s certificates on any payment date are subordinated to all payments of principal and interest on the notes by the issuing entity. In accordance with the requirements for an “eligible horizontal residual interest” under Regulation RR, on any payment date on which the issuing entity has insufficient funds to make all of the distributions described under “The Transfer Agreements and the Administrative Agreement—Priority of Payments” and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration”, any resulting shortfall will, through operation of the priority of payments, reduce amounts distributable to the holders of the certificates prior to any reduction in the amounts payable for interest on, or principal of, any class of notes. The material terms of the notes are described in this prospectus under “The Notes,” and the other material terms of the certificates are described in this prospectus under “Summary of Terms—The Certificates.”

 

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SC does not intend to transfer or hedge the portion of the retained economic interest that is intended to satisfy the requirements of Regulation RR except as permitted under Regulation RR. All or a portion of the retained eligible horizontal residual interest may be transferred on or after the closing date to any other majority-owned affiliate of SC that is also a wholly-owned special purpose subsidiary of SC.

EU Securitization Regulation and UK Securitization Regulation

For further information on the matters referred to below, and the corresponding risks, see “Legal Investment—Requirements for Certain EU and UK Regulated Persons and Affiliates” in this prospectus.

On the closing date, SC will covenant and agree, with reference to the EU Securitization Regulation and the UK Securitization Regulation, in each case as in effect and applicable on the closing date, that it will:

(a)        as an “originator” (as such term is defined for the purposes of each of the EU Securitization Regulation and the UK Securitization Regulation), retain upon issuance of the notes, and on an ongoing basis for as long as any notes remain outstanding, a material net economic interest of not less than 5% in the securitization transaction described in this prospectus (the “SR Retained Interest”) in accordance with paragraph (d) of Article 6(3) of the EU Securitization Regulation and paragraph (d) of Article 6(3) of the UK Securitization Regulation, in each case as in effect and applicable on the closing date, by holding all of the membership interests in the depositor (or one or more other wholly-owned special purpose subsidiaries of SC), which in turn will retain on an ongoing basis for as long as any notes remain outstanding a portion of the aggregate Percentage Interests in the certificates to be issued by the issuing entity, such retained portion of the Percentage Interests (i) being pro rata with the Percentage Interests not required to be retained and (ii) representing at least 5% of the aggregate nominal value of the receivables in the receivables pool transferred to the issuing entity on the closing date;

(b)        not (and it will not permit the depositor or any of its other affiliates to) subject the SR Retained Interest to any credit risk mitigation or hedging, or sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the SR Retained Interest, except to the extent permitted by the SR Rules;

(c)        not change the manner in which it retains or the method of calculating the SR Retained Interest while any of the notes are outstanding, except to the extent permitted by the SR Rules; and

(d)        provide ongoing written confirmation of its continued compliance with its obligations in the foregoing clauses (a), (b) and (c), (i) in or concurrently with the delivery of each monthly report to noteholders, (ii) following a notification of the occurrence of any event of default and (iii) from time to time upon request by any noteholder in connection with any material change in the structural features of the securitization transaction described in this prospectus that could materially impact the performance of the notes or any material change in the risk characteristics of the notes or receivables.

Article 6(1) of the EU Securitization Regulation and Article 6(1) of the UK Securitization Regulation each provide that an entity shall not be considered an “originator” within the meaning thereof if it has been established or operates for the sole purpose of securitizing exposures. In this regard, see, in particular, “The Sponsor” and “The Originator” in this prospectus for information with regard to SC’s business and related operations. With regard to SC’s credit-granting criteria and processes, see “The Originator—Credit Risk Management and Underwriting” and “Servicing by SC” in this prospectus.

Article 6(1) of the EU Securitization Regulation also provides that “[w]hen measuring the material net economic interest, the retainer shall take into account any fees that may in practice be used to reduce the effective material net economic interest”. It is uncertain how this requirement of the EU Securitization Regulation would apply in the context of the transaction described in this prospectus with regard to any servicing fees, Supplemental Servicing Fees or other fees or amounts payable to, or collected by, SC in its capacity as servicer, any fees payable to SC in any other capacity or any fees payable to any other party.

The securitization transaction described in this prospectus is not being structured to ensure compliance by any person with the transparency requirements in Article 7 of the EU Securitization Regulation or Article 7 of the UK Securitization Regulation. In particular, neither SC nor any other party to the transaction described in this prospectus will be required to produce any information or disclosure for purposes of Article 7 of the EU

 

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Securitization Regulation or Article 7 of the UK Securitization Regulation, or to take any other action in accordance with, or in a manner contemplated by, such articles.

Except as described herein, no party to the transaction described in this prospectus is required by the transaction documents, or intends, to take or refrain from taking any action with regard to such transaction in a manner prescribed or contemplated by the SR Rules, or to take any action for purposes of, or in connection with, facilitating or enabling compliance by any person with any applicable Investor Requirements and/or any corresponding national measures that may be relevant.

It remains unclear, in certain respects, what will be required for Affected Investors to demonstrate compliance with the applicable Investor Requirements. Each prospective investor that is an Affected Investor is required to independently assess and determine whether the agreement by SC to retain the SR Retained Interest as described in this prospectus and the information provided in this prospectus generally, or otherwise to be provided to noteholders, are or will be sufficient for the purposes of such prospective investor’s compliance with any applicable Investor Requirements and/or any corresponding national measures that may be relevant. Prospective investors that are Affected Investors should be aware that the interpretation of the applicable Investor Requirements remains uncertain and that supervisory authorities and national regulators may have different views of how the applicable Investor Requirements should be interpreted, and those views are still evolving.

None of SC, the depositor, the issuing entity, the underwriters, the indenture trustee, their respective affiliates nor any other party to the transactions described in this prospectus (a) makes any representation that the agreement by SC to retain the SR Retained Interest as described in this prospectus or any information provided in this prospectus generally, or otherwise to be provided to noteholders, are or will be sufficient in all circumstances for purposes of any person’s compliance with any applicable Investor Requirements and/or any corresponding national measures that may be relevant, or with any other applicable legal, regulatory or other requirements, or that the structure of the notes, SC (including its holding of the SR Retained Interest) and the transactions described herein are otherwise compliant with the SR Rules or any other applicable legal, regulatory or other requirements; (b) shall have any liability to any person with respect to any deficiency in such agreement or any such information, or with respect to any person’s failure or inability to comply with any applicable Investor Requirements and/or any corresponding national measures that may be relevant, or with any other applicable legal, regulatory or other requirements (other than, in each case, any liability arising under a transaction document as a result of a breach by such person of that transaction document); or (c) shall have any obligation to enable any person to comply with any applicable Investor Requirements and/or any corresponding national measures that may be relevant, or with any other applicable legal, regulatory or other requirements, or any other obligation with respect to the SR Rules (other than, in each case, the specific obligations undertaken and/or representations made by SC in that regard under the transaction documents).

Any failure by an Affected Investor to comply with the applicable Investor Requirements with respect to an investment in the offered notes may result in the imposition of a penalty regulatory capital charge on that investment or other regulatory sanctions and/or remedial measures being taken or imposed by the competent authority of such Affected Investor. The SR Rules and any other changes to the regulation or regulatory treatment of the notes for some or all investors may negatively impact the regulatory position of noteholders or prospective investors and may have an adverse impact on the value and liquidity of the notes offered by this prospectus. Prospective investors should analyze their own regulatory position, and are encouraged to consult with their own investment and legal advisors, regarding the application of and compliance with any applicable Investor Requirements or other applicable regulations and the suitability of the offered notes for investment.

THE ORIGINATOR

All of the receivables were originated by SC. We use the term “originator” to refer to SC. The following is a description of the origination, underwriting and servicing procedures used by SC with respect to the receivables originated by SC and transferred to the issuing entity.

The originator originated the receivables through a variety of origination channels across a wide spectrum of credit quality obligors ranging from prime credit obligors to sub-prime credit obligors. Sub-prime receivables, in general, are expected to have higher loss rates and delinquency rates than receivables that represent the obligations of prime credit obligors.

 

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Receivable and Calculation Methods

Each receivable has a fixed monthly payment and will amortize in full over its term assuming payments are made on time. Each contract utilizes the “simple interest method” for allocating its payment amount. Simple interest is calculated by multiplying the daily interest rate by the principal by the number of days that elapse between payments.

Receivable Origination Channels

SC primarily originated the receivables by purchasing motor vehicle installment sale contracts and/or installment loans from dealers pursuant to a dealer agreement between SC and the dealer. In addition, SC originated some of the receivables directly with the obligor in connection with vehicle purchases by customers at the end of a lease. SC also originated some of the receivables through pass-through arrangements in place with third parties.

Each dealer agreement, among other things, sets out the guidelines and procedures of the purchasing and origination process. These dealer agreements generally provide for the repurchase by the dealer of any receivable for its outstanding principal balance, plus accrued but unpaid interest, if any representations or warranties made by the dealer relating to the receivable are breached. The representations and warranties typically relate to the origination of a receivable and the security interest in the related financed vehicle and not to the collectability of the receivable or the creditworthiness of the related obligor.

Active dealers are monitored in accordance with SC’s dealer performance management strategy and framework using metrics designed to monitor the performance of its network of dealers. SC’s dealer management conducts dealer quality reviews when a referral is sent from a functional area or when a dealer fails to meet specified program metrics. Under SC’s dealer management progression, if issues are identified by SC during a dealer quality review, then the dealer will be placed on a treatment plan. Dealers on a treatment plan are re-evaluated after completion of the treatment plan, and are either returned to regular monitoring, subject to stipulations, as described below under “—Funding of Approved Contracts and Stipulations” or are recommended for deactivation.

Additionally, for customers who have leased a vehicle through the “Chrysler Capital” channel, SC provides financing to those customers in connection with purchases of the vehicles at lease maturity.

Under the pass-through arrangements, applications are directed to SC who may approve the application for funding. In most cases, these “pass-through” receivables are underwritten using the same processes and decision models as other types of receivables originated by SC, although the specific underwriting criteria and contract terms may vary among programs. In some cases, SC funds the loan to the related obligor directly, while in other cases, the related pass-through counterparty funds the loan at closing and sells it to SC the following day.

Credit Risk Management and Underwriting

Credit Risk Management Overview

SC is required to operate within sound, well-defined credit-underwriting criteria that are consistent with applicable regulatory and supervisory guidelines. In furtherance of the foregoing, SC adopted a policy (the “Loan Policy”) establishing principles and requirements for the management of credit risk stemming from retail consumer auto lending activities. In addition to the Loan Policy, SC has adopted a credit policy limit standard which provides guidance regarding when an originated contract would be considered an exception to SC’s underwriting guidelines (the “Credit Guidelines”). SC has revised, and will continue to revise, the Loan Policy and Credit Guidelines from time to time.

The Loan Policy is designed to support the effective identification, assessment, control, monitoring and reporting of credit risks across the retail consumer auto lending lifecycle, including but not limited to application acquisition, decisions and originations, funding, servicing and collections. The principles and requirements in the Loan Policy apply to all retail consumer auto lending activities of SC.

Under the Loan Policy, SC has established a suite of key risk indicators to monitor and control credit risk, including the establishment of triggers and limits, ongoing monitoring and reporting, and escalation and management of breaches.

 

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Application Decisioning and Underwriting

In accordance with the Loan Policy and Credit Guidelines, originations generally include at a minimum an evaluation of applicant credit history, ability to repay, and collateral. SC utilizes a proprietary underwriting platform for loan originations. Currently, most applications are auto-decisioned. Once a dealer submits an application electronically, SC’s systems implement an automated process which (i) acquires external data, such as credit bureau data, (ii) scores the transaction using a custom risk score, (iii) writes key data in SC’s system of record in a form that cannot be manually modified, (iv) establishes a risk-adjusted price and (v) issues an electronic response or proposal directly to the dealer. The entire automated process occurs typically within seconds of receipt of the electronic loan application. If an auto-decision is not rendered, the application will be manually reviewed, have system recommendations applied, and be manually decisioned. Should a dealer wish to make changes to the initial proposal, the dealer may submit an updated deal structure request, which may be completed electronically or through other methods such as direct discussions between the dealer and SC.

SC’s current decision model produces a custom risk score which is utilized in assessing credit risk, establishing appropriate risk-based pricing and ensuring an acceptable level of return. An applicant’s custom risk score is documented in SC’s system of record and may not be modified manually. Credit decisions are based on multiple factors including, but not limited to: the custom risk score, existence and value of a trade-in or down payment, income, length and depth of credit history, affordability and value of the financed vehicle. The custom risk score is reviewed and adjusted periodically to assess its predictive capability. However, credit scoring and credit models do not eliminate credit risk. New custom risk scores may be developed, reviewed and approved based on internal policy. From time to time SC refines, and in the future may further refine, its credit scoring methodology and decision model.

After applying the custom risk score, the application is allocated a price tier based on a loan structure, which drives final pricing. Under SC’s pricing model, SC has the flexibility to compensate for risk either by increasing the APR under a contract and/or by purchasing the contract from the dealer at a discount. Approval by the automated system yields one of the following status results, which take into account both the risk of the applicant as well as the proposed structuring and pricing for a contract: (i) Approved, whereby the credit application and deal structure meet governing parameters and credit is offered on the terms requested; (ii) Conditioned, whereby the applicant’s custom risk score is above SC’s minimum cutoff, but the requested structure or vehicle does not meet the requirements of an approval; (iii) Counteroffer, whereby a decision to grant credit is given in a different amount or on other terms than requested; (iv) Decline, whereby the applicant’s custom risk score did not meet the minimum requirement for a particular loan and collateral type; and (v) Reject, whereby an application is submitted but it does not meet SC’s minimum credit criteria, such as minimum age. SC does not purchase a contract from the related dealer if the final status result for the related application is Decline or Reject.

As discussed above, SC has revised the Loan Policy and refined its credit scoring methodology and decision model from time to time. Consequently, receivables included in the pool have been originated under multiple iterations of the Loan Policy and Credit Guidelines (including predecessors to such policy and guidelines). Each version of the Loan Policy provides guidance regarding when an originated contract would be considered an exception to SC’s underwriting guidelines.

Each Loan Policy and the related Credit Guidelines outline underwriting “policy limits”. Some examples of currently used policy limit categories are: maximum payment-to-income; maximum debt-to-income; maximum LTV; maximum term; maximum age of the financed vehicle; minimum amount financed; maximum amount financed; maximum mileage; maximum financed amount of ancillary (or “backend” products); and maximum payment amount. However, not all policy limit categories are used or required based on the origination channel or anticipated risks. From time to time, SC has revised the policy limits, and expects to continue revising the policy limits, by adding or removing policy limit categories and/or by revising the applicable policy limit threshold at which an exception occurs.

For example, under the initial Loan Policy, any contract which exceeded a policy limit (as then in effect) at origination was considered an exception to SC’s underwriting guidelines. However, the initial Loan Policy also included “operating limits” applicable to various loan parameters. These operating limits were initial thresholds that required contracts to be manually reviewed by credit specialists while policy limits were thresholds beyond which a contract would be considered an exception.

 

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Subsequent iterations of the Loan Policy and related Credit Guidelines have incorporated the concept of compensating factors. Policy limits may be exceeded up to a specified cap if a compensating factor is present, and the originated contract would then not be considered an exception to SC’s underwriting policies. Compensating factors are analytically derived deal structure and/or credit bureau attributes that contribute to positive performance of the related loans at a level comparable to loans originated within the policy limits. If a policy limit is exceeded without the requisite compensating factor or is exceeded beyond the specified cap for that limit, then approval by the appropriate level of seniority within SC is required. From time to time, SC has added or removed applicable compensating factor criteria and may elect to not apply or consider compensating factors under certain circumstances.

In 2021, SC began piloting a new decision platform, referred to as the “Pricing Decision Platform”, as part of the further evolution of SC’s custom risk score and pricing model. The credit policy limit framework under the Pricing Decision Platform, including the definition of exceptions, is similar to the credit policy limit framework and definition of exceptions applicable under the previous Loan Policy and Credit Guidelines. To facilitate a smooth transition to the new Pricing Decision Platform, SC has continued to underwrite originations in accordance with the Loan Policy and Credit Guidelines while slowly increasing the percentage of originations underwritten in accordance with the Pricing Decision Platform. The majority of all new originations are underwritten in accordance with the Pricing Decision Platform.

As discussed above, SC’s policies and practices have evolved over time, and the methodology for determining whether a receivable constitutes an exception to SC’s underwriting guidelines has similarly evolved. Receivables originated prior to August 31, 2017 were originated prior to the implementation of the auto loan operating policy and the August 31, 2017 modifications to the credit risk management auto standard that preceded the Loan Policy. Solely for determining whether a receivable was considered by SC to be an exception to its underwriting guidelines for purposes of the tables below under “The Receivables Pool—Exceptions to Underwriting Criteria”, a receivable originated on or prior to August 31, 2017 is deemed an exception if it does not conform to the policy limits outlined in the most recent version of the Credit Guidelines and Loan Policy (without giving effect to the Pricing Decision Platform), even if that receivable was underwritten and originated in conformance with the underwriting policy in effect at the time of origination.

Funding of Approved Contracts and Stipulations

Underwriting decisions are based on information provided to SC by the applicant and the dealer. However, SC may verify the identity, employment, income, residency and other applicant or vehicle information in accordance with SC’s origination guidelines either before the application is approved and/or before the contract is funded in connection with a stipulation. Stipulations are action or documentation requirements systemically and/or manually applied within the systems that do not alter the underlying terms of the approval. Stipulations can be applied during the underwriting or funding process and could result in additional information, consumer contact or specific loan parameters that must be satisfied before the loan is purchased. Stipulations may vary depending on SC’s assessment of the overall risk a dealer presents to SC and its customers and may be waived in accordance with SC’s funding override procedures. Prior to funding an approved contract, SC employs its proprietary electronic platform, which was designed to handle the entire post-approval funding process, including the archiving of documents, applicant verification process and any re-calculation of final pricing based on any revisions to the original contract terms. SC’s operations department has procedures outlining when verifications are required and what the acceptable forms of information are for each verification. Verification documentation generally address applicant identity, insurance verification, proof of income, proof of residence and proof of employment.

From time to time following the origination of a receivable, the interest rate specified on the related contract may be decreased at the discretion of the originator after review of the original interest rate. Any such decrease is reflected in a customer adjustment letter sent to the obligor.

SC generates a proprietary loan funded score (formerly known as loss forecasting score) after each contract is funded. The proprietary loan funded score is used by SC to further assess the probability that a funded loan will default and is based on the data used under SC’s credit scoring model as well as final loan structure, pricing terms, and additional risk factors and attributes that SC’s credit risk management department considered relevant in the development of SC’s proprietary loan funded scoring model. SC’s loan funded scoring model is reviewed and

 

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adjusted periodically to assess its predictive capability. SC has in the past updated its loan funded scoring model and may further refine the model from time to time.

Contracting – Tangible and Electronic

Receivables contracts are originated in either tangible or electronic form. If the Base Transaction is issued, approximately 44.44% of the receivables in the pool (by Pool Balance as of the cut-off date) were originated as electronic contracts. If the Upsize Transaction is issued, approximately 44.02% of the receivables in the pool (by Pool Balance as of the cut-off date) were originated as electronic contracts.

In the case of dealer-originated receivables evidenced by tangible contracts, contract packages were sent by the dealers to SC. Key documentation was scanned to create electronic images and electronically forwarded to the originator’s centralized receivable processing department. The original documents were subsequently sent to an outsourced storage location and stored in a fire-resistant vault. Upon electronic receipt of contract documentation, the receivable processing department reviewed the contract packages for proper documentation and regulatory compliance and completed the entry of information into SC’s loan accounting system.

In the case of receivables evidenced by electronic contracts, SC has contracted with third parties to facilitate the process of creating and storing those electronic contracts. The third parties’ technology system permits transmission, storage, access and administration of electronic contracts and is comprised of proprietary and third-party software, hardware, network communications equipment, lines and services, computer servers, data centers, support and maintenance services, security devices and other related technology materials that enable electronic contracting in the automobile retail industry. The third parties’ system allows for the transmission, storage, access and administration of electronic contracts. Through use of the third parties’ system, a dealer originates electronic retail installment contracts and/or installment loans and then transfers these electronic contracts to SC.

The third-party systems use a combination of technological and administrative features that are designed to: (i) designate a single copy of the record or records comprising an electronic contract as being the single authoritative copy of the receivable; (ii) manage access to and the expression of the authoritative copy; (iii) identify SC as the owner of record of the authoritative copy; and (iv) provide a means for transferring record ownership of, and the exclusive right of access to, the authoritative copy from the current owner of record to a successor owner of record. Once dealer-originated receivables were cleared for funding, the funds were transferred, electronically or via check, to the dealer. Upon funding of the receivable, SC acquired a perfected security interest in the motor vehicle that was financed.

THE SERVICER

SC will be the servicer for all of the receivables. We refer to SC as the “servicer.” SC (or its predecessor in interest) has been servicing sub-prime motor vehicle installment sale contracts since 1997. In addition, SC has acted as servicer for over 70 securitizations of sub-prime motor vehicle retail installment sale contracts sponsored by SC since the first quarter of 1998, as well as 15 acquired securitizations. SC also services contracts for third parties.

All servicing and processing for the receivables will be performed by the servicer. The servicer will be responsible for billing, collecting, accounting and posting all payments received with respect to the receivables, responding to obligor inquiries, taking steps to maintain the security interest granted in the financed vehicles or other collateral, coordinating the ongoing liquidation of repossessed collateral, and generally monitoring each receivable and the related collateral. Information about the servicing practices of SC is set forth below under “Servicing by SC.”

The servicer will have the right to delegate, at any time without notice or consent, certain servicing and processing responsibilities of the receivables to other entities pursuant to the sale and servicing agreement. Such delegation will not release the servicer of its responsibility with respect to its duties under the sale and servicing agreement, and the servicer will remain obligated and liable to the issuing entity and the indenture trustee for those duties as if the servicer alone were performing those duties.

See “The Transfer Agreements and the Administration Agreement” which describes other obligations of the servicer under the sale and servicing agreement.

 

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SERVICING BY SC

SC’s servicing practices are closely integrated with the origination platform of SC and also are governed by the Loan Policy. This results in the efficient exchange of information which aids both servicing and evaluation and modification of product design and underwriting criteria. As part of its risk management program, SC periodically performs comprehensive compliance risk assessments that identify products, services and customer types to determine risks associated with, among other things, consumer compliance laws, regulations and supervisory guidance. In connection with these risk assessments, SC may elect to modify its customary servicing practices or may enhance training and procedures related thereto, including by providing enhanced training to specific servicing personnel. SC’s specific servicing policies and practices may change over time.

Payment Methods and Overpayments. Obligors have a variety of available payment options, including mail through SC’s lockbox service, overnight delivery services, a customer website, an interactive voice response system, text, third-party payment processing services and verbally with SC’s customer service and collections staff. Debit and ACH payments are accepted through these payment avenues, but SC does not accept payment by credit card. Payment refunds are made to the obligor in the event of an overpayment (including in connection with a payoff).

Payment Due Date Changes. To make payment due dates more convenient for obligors (for example, to move payment due dates to coincide with an obligor’s payroll cycle), SC may approve a change in the due date for current accounts or accounts where the due date change would bring the account current. Currently, only one due date change may be approved during the term, and a new payment due date cannot be more than 20 days into the future from the original due date.

Partial Payments. The servicer considers a receivable delinquent when an obligor fails to pay the required portion of the scheduled payment by the due date, as determined in accordance with SC’s customary servicing practices. In July 2019, SC revised its servicing practices related to partial payments. Prior to these changes, the required minimum payment for all receivables originated by SC (other than receivables originated by SC through its “Chrysler Capital” channel) or acquired by SC from an unaffiliated third-party originator prior to January 1, 2017 was 50% of the scheduled payment; the required minimum payment for all other receivables in SC’s managed portfolio was 90% of the scheduled payment. After implementing the July 2019 changes, the required minimum payment under SC’s servicing practices for all receivables (regardless of origination channel or origination date) is 90% of the scheduled payment. In each case, the period of delinquency is based on the number of days payments are contractually past due and is determined based on SC’s servicing practices related to partial payments as in effect at the time the obligor made the scheduled payment. Under SC’s current accounting policy, which was in effect prior to the July 2019 changes to SC’s servicing practices, a receivable is considered delinquent if an obligor fails to pay at least 90% of the scheduled payment (regardless of origination channel or origination date).

Fee Waivers and Refunds. In some instances, accumulated Supplemental Servicing Fees on an obligor’s account may be waived by someone with the appropriate level of authority (which varies based on the status of the account and the amount to be waived). SC also has the discretion to refund any Supplemental Servicing Fees it has collected to the obligor. As described below under “The Transfer Agreements and the Administration Agreement—Servicing Compensation and Expenses”, the servicer will be entitled to retain all Supplemental Servicing Fees.

Payoffs and Balance Waivers. A payoff is an amount quoted to the obligor, a dealer or an insurance company that will satisfy all interest, late fees, miscellaneous fees and principal due and accrued on the related receivable. A “short” payoff is a payment applied that does not satisfy the full final payoff amount, often because of accrued interest or late fees after a payoff is quoted. When the remaining account balance is $49.99 or less, the receivable will be considered paid-in-full. Balance waivers above $49.99 may be made with approval commensurate with the dollar amount of the waiver and the status of the receivable.

Settlements. A settlement (also known as a principal reduction or debt forgiveness) is an option to assist obligors to settle or pay less than the full amount due on a receivable. An account settlement will only be accepted by the servicer in order to reduce an imminent loss and pursuant to management approval with the level of approval commensurate with the dollar amount of the principal reduction.

 

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Bankruptcy. After notification that an obligor has filed for bankruptcy protection, the account is routed to the bankruptcy department to facilitate compliance with applicable bankruptcy law. SC’s bankruptcy department is responsible for servicing, processing and monitoring all bankruptcy accounts from the point of bankruptcy initiation to final disposition. Once the bankruptcy filing is verified by the bankruptcy department, all collection and recovery activities stop until a motion for relief from stay has been granted, a reaffirmation agreement is reached or the bankruptcy is dismissed. Through a bankruptcy account modification, SC can restructure debts to include interest, payment amount and term to reflect the treatment of the receivable in the confirmed bankruptcy plan. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—A receivables pool that includes substantially all receivables that are the obligations of sub-prime obligors will have higher default rates than a receivables pool that includes primarily obligations of prime obligors.”

Servicemembers Civil Relief Act. Under the terms of the Servicemembers Civil Relief Act, as amended (the “Relief Act”), an obligor who enters military service after the origination of such obligor’s receivable (including a borrower who was in reserve status and is called to active duty after the origination of the receivable) is entitled to certain protections, as described under “Material Legal Aspects of the Receivables—Servicemembers Civil Relief Act”. SC’s customary servicing practices for the benefit of obligors in military service (and, in some cases, family members and certain other related parties of servicemembers in military service, even where not required by law) has in the past and may in the future exceed the minimum requirements required by the Relief Act or other applicable law. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—The application of the Servicemembers Civil Relief Act may lead to delays in payment or losses on your notes.”

Disaster Relief and Recovery. In the event of a natural or manmade disaster, SC may implement a range of actions with respect to impacted obligors and the related receivables, including the cessation of repossession and collection efforts, offering assistance through modification or extension of the receivable and assisting with the processing of insurance claims. The scope of any such action may exceed the general requirements for eligibility with respect to such action outside of a natural or manmade disaster situation. SC reevaluates and revises its policies related to disaster relief and recovery from time to time based on varying economic hardships arising out of natural and manmade disasters. For more information regarding the impact of a natural or manmade disaster on the receivables and your investment in the notes, see “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—The geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes.”

Claims and Total Loss. SC’s insurance department is responsible for assisting customers and insurance companies with insurance claims upon notification of an incident. SC’s insurance department helps facilitate claims processing by providing necessary documentation to insurance companies and repair facilities, validation of documents received and follow-up calls to customers, insurance companies and repair facilities as needed. Claim types facilitated by SC’s insurance department include repair, total loss, GAP and credit life and disability. The obligors for all of the receivables owned by the issuing entity are required under the receivables to maintain physical damage insurance policies naming the originator as loss payee. SC does not force place insurance in the event of a lapse and SC may, but is not required under the transaction documents to, use a third-party vendor to monitor proof of insurance. Since obligors may choose their own insurers to provide the required coverage, the specific terms and conditions of their policies may vary. Customers are responsible for any balances that remain on an account after the insurance proceeds have been received and posted.

Servicing Tools. SC provides various options to assist obligors with temporary setbacks, including extensions and modifications, each of which has been designed to comply with applicable federal regulatory and legal guidance. Prior to implementing any of these options, SC assesses account status and an obligor’s hardship or situation in an effort to determine if a loss mitigation treatment will increase the likelihood that an obligor is able to repay obligations under the receivable. For example, when evaluating relief options, SC considers at a minimum the type of hardship or situation affecting the obligor, how long the hardship or situation is likely to impact the obligor’s ability to repay and whether the relief option will increase the likelihood of the obligor’s ability to repay. As part of the approval process for extensions or modifications, the obligor is expected to establish a renewed willingness and ability to repay the loan in accordance with regulatory ability-to-pay guidance. However, for obligors impacted by a natural disaster, an extension, modification or reduction in payment may be offered without assessing the obligor’s

 

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willingness and ability to pay, as described above under “—Disaster Relief and Recovery”. None of the loss mitigation treatments currently include interest grace periods. The Loan Policy sets forth explicit requirements that control the use of these options. The Loan Policy, including specific policies related to the use of extensions, modifications, reductions in payment and other servicing tools, is reevaluated and revised from time to time. Exceptions to the Loan Policy, including eligibility requirements for loss mitigation treatment, must be approved by someone with the appropriate level of authority.

Extensions. An extension is the process of moving one or more monthly payments to the end of the receivable’s term (thereby extending the maturity date of the contract) in order to provide an obligor with temporary financial relief. Historically, extensions were generally limited to a maximum of eight months during the life of the loan. However, in 2020 SC modified its general servicing practices such that extensions were generally limited to a maximum of twelve months during the life of the loan, and SC recently further modified its general servicing practices to generally limit extensions to a maximum of eight months during the life of the loan plus an additional eight months during a disaster situation. Under the current Loan Policy, each extension ranges from one to three months in length, with the maximum number of months per extension limited to three months. Additionally, six months must lapse from the date of origination before the obligor is eligible for an extension, and six months must have elapsed since a previous extension or modification. Finally, an account currently active in a temporary reduction in payment, as described below under “—Temporary Reduction in Payment”, is not eligible for an extension.

Modifications. Under the current Loan Policy, a hardship modification is the process of decreasing an obligor’s monthly payment by changing the terms of the original contract, and a mature modification is a modification provided to obligors who are within six months of the maturity date which extends the term of the receivable and may reduce the interest rate for the new remaining term. Additionally, SC is considering a revision to its Loan Policy that would provide a modification option which would result in a reduction of the interest rate of the receivable and may result in an extension of the term for eligible obligors at risk of default and repossession of the related financed vehicle. A modification is generally only an option for accounts that have not been charged-off, and for which a specified minimum number of payments have been made. Obligors are only eligible for a single hardship modification during the life of the receivable, but an obligor who has received a hardship modification may also be granted a mature modification. The Loan Policy provides SC with the ability to implement a range of options with respect to an impacted receivable in connection with a hardship modification, including permitting voluntary surrender of the related financed vehicle, waiving the receivable’s deficiency balance, permanent or temporary reduction in the principal balance of or interest rate on such receivable and extension of the receivable’s term.

Collections. Primary collections activities are performed at multiple U.S. servicing centers to enhance SC’s servicing capabilities and the level of customer service delivered to SC’s obligors. SC also uses vendors for collections and reviews and certain other customer service operations and servicing-related activities. SC uses application characteristics, refreshed credit data, model-driven methodologies and obligor behavior to apply a risk-driven collections strategy. SC may use a common behavior score to determine the entry point into predictive collections and the intensity of treatment upon entry and may use a separate score to determine repossession eligibility. Under SC’s servicing practices, communication with obligors (whether written or verbal), is required to be conducted in accordance with applicable regulatory and statutory requirements. Phone conversations between obligors and SC are recorded or monitored for performance evaluation, training and other business related purposes. In order to minimize losses, SC attempts to collect payments from delinquent customers to bring the account current. At this stage of the collections process, the objectives include, among other things: to collect past due payments; to educate obligors on the consequences of non-payment; to use available tools to support repayment, workout or disposition of collateral (where applicable, and as a last resort), including loan modification tools (e.g., hardship modifications, extensions) to assist in repayment of amounts owed.

The collection process is divided into stages. The number of days a receivable is delinquent enough to trigger any stage in the collection process varies depending on the behavior score and credit quality of the related obligor. The first stage in the collection process is early stage collections. SC utilizes outsourcing partners to assist in servicing receivables at the earliest stages of delinquency. SC’s outsourcing partners utilize the same platform, systems, and quality assurance metrics as its direct employees. SC’s early stage customers are generally in a pooled environment and contacted through its integrated telephony system where the call and customer information are delivered to employees simultaneously. The second stage in the collection process is late stage collections.

 

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Receivables within the second stage are worked by an advanced collection unit that provides light skip work, as well as enhanced negotiating skills. The objective of late stage collections is to reduce delinquency, mitigate loss and limit the number of receivables that roll to SC’s potential loss group. If the delinquency is not cured during the late stage collections process, repossession of the vehicle may be recommended. The potential loss group services receivables that move past the late stage collections process. Receivables within this stage are worked by SC’s most experienced employees. Potential loss employees utilize heavy skip tracing and negotiating skills to determine the “collectability” or location of the receivable.

Repossession. If a receivable is past due or has defaulted, then SC may repossess the related financed vehicle. The management of repossessed vehicles aims to minimize loss and may be determined by various strategies, including liquidation. In determining whether to repossess a financed vehicle, SC may also take into account current economic conditions as well as the state of the used automobile market. All repossessions must be approved by management or an authorized designee. Prior to approving a repossession, SC verifies that the obligor is not subject to protection under the Relief Act. Where required by law or by its customary servicing practices, SC sends the obligor a right-to-cure letter prior to repossession of the financed vehicle, informing the obligor and/or the co-obligor, if applicable, that the receivable is in default and that the related financed vehicle will be repossessed if the obligor and/or the co-obligor, if applicable, fails to cure the default within the specified time. Additionally, an obligor and/or a co-obligor, if applicable, has the ability to voluntarily surrender a financed vehicle at any time. The right-to-cure letter may be waived as an exception for voluntary surrenders or if the vehicle securing the receivable is in jeopardy by reason of an impound, seizure or abandonment. An exception to the general process requirements for a repossession must be approved by a vice president or more senior officer. After repossession, a “Notice of Intent to Sell” letter is sent to the obligor where required by state law, notifying the obligor that the vehicle will be sold at auction unless all requirements for a reinstatement are met. Repossession efforts are closed when a payment is made on the receivable or when an extension request is complete, but may be resumed if payments on the receivable remain past due and no additional payments are made. If SC is unable to repossess a financed vehicle, then SC as servicer may pursue an action for replevin. Replevin is a court order that provides legal authority for a lienholder or law enforcement (on the lienholder’s behalf) to recover the financed vehicle on a receivable in default. If the obligor is subject to a bankruptcy proceeding, then repossession and replevin options are subject to additional protections and considerations and are supervised by SC’s bankruptcy department.

SC’s asset remarketing group manages the inventory of repossessed assets from the point of repossession to the application of liquidation proceeds. Repossessed vehicles are sold at auction. In addition, the asset remarketing group monitors all expenses related to the sales process and SC’s credit risk management information systems group monitors and provides oversight of auction activities on a monthly basis.

Impounds. SC’s impound department is responsible for supporting the overall loss mitigation and asset recovery of impounded vehicles to prevent unintended lien loss and to determine the appropriate course of action regarding the repossession or abandonment of financed vehicles. The impound department, subject to specific limitations (e.g., the vehicle has already been assigned for repossession), generally will attempt to make contact with the obligor to determine whether the obligor intends to recover the vehicle. With the appropriate level of management approval, which varies based on the dollar amount of the associated recovery costs, SC may elect to bailout the vehicle after taking into consideration all associated costs and expected net proceeds prior to repossession or abandonment of the impounded vehicle. Impound bailout costs may consist of repossession fees, collateral evaluation fees, storage fees, repair fees, transportation fees and other associated recovery fees. These fees are allocated to the obligor’s account.

Reinstatements. A reinstatement is an agreement with the obligor to restore the receivable to the terms prior to the repossession. The Loan Policy provides that SC must comply with state specific guidelines and regulatory requirements to reinstate an account. As part of the approval process for a reinstatement, the obligor is expected to establish a renewed willingness and ability to repay the loan in accordance with regulatory ability-to-pay guidance. The ability to make ongoing future payments may be determined from new information pertinent to any of the following situations, but not limited to: income reduction or loss; job changes; life changes (e.g., death in the family, family emergencies, medical); car repairs; and unexpected expenses. Reinstatements must be approved by someone with the appropriate level of authority, which level of authority varies based on the number of previous repossessions and the existence of other factors such as an early payment default or threats of violence. In addition, the Loan Policy provides specific additional guidelines in connection with a reinstatement for obligors in bankruptcy.

 

45

Charge-offs. SC defines a charge-off as the accounting process of writing off likely uncollectable receivables. For charge-off accounts, collections activity continues with respect to any outstanding balance other than accounts in active bankruptcy. Once a receivable is charged-off, it is always indicated as a charge-off in SC’s system of record. SC’s charge-off policy is designed to ensure compliance with applicable law and a consistent approach to the charge-off of delinquent accounts. Generally, a receivable is charged-off at month-end during the month in which the receivables reaches 120 days past due. Under SC’s servicing practices, if a vehicle is sold following a repossession, then the receivable will be charged-off upon receipt of the related liquidation proceeds and if a receivable is confirmed as being the subject of fraud, then the receivable will be charged-off within 60 days from the last day of the month the confirmed fraud was identified. Receivables with a deceased obligor and no surviving obligors are charged-off within 60 days of notification. Receivables with an obligor in bankruptcy are charged-off within 60 days of receipt of filing from the bankruptcy court, and the balance of the receivable is written down to the value of the collateral (less cost to sell). Once a receivable has been charged-off (or, in some circumstances, once a vehicle has been repossessed) by the servicer, interest may stop accruing.

Under SC’s servicing practices, receivables related to repossessed vehicles are charged-off at the end of the month during which the earliest of any of the following occurs: (a) liquidation of the repossessed vehicle; (b) more than 90 days have elapsed since the date the vehicle was repossessed; and (c) the receivable becomes contractually delinquent 120 days. The amount of the initial charge-off shall be equal to the then current outstanding receivable principal balance less, if the repossessed vehicle has been liquidated, the sum of the proceeds from the disposition of the vehicle, net of the costs incurred in repossessing, storing and disposing of the vehicle. The initial charge-off may be adjusted for additional recoveries or charge-offs, to reflect the actual proceeds received from rebates or the cancellation of outstanding insurance policies and/or extended service contracts.

If the vehicle financed by a receivable is a total loss, the receivable will be charged-off at the end of the month when the receivable becomes contractually delinquent greater than 120 days.

Perfection of Security Interests

Each contract contains a sale assignment with a clause granting the originator a security interest in the related financed vehicle. In each state in which the originator does business, a security interest is perfected by noting the secured party’s interest on the financed vehicle’s certificate of title. The originator or its predecessor in interest (if applicable), is recorded as lienholder on the financed vehicle titles. The dealer is required to complete the title work and take all the steps required to perfect the originator’s security interest. As described below under “The Transfer Agreements and the Administration Agreement—Representations and Warranties”, SC may be required to repurchase a receivable if the originator’s security interest in the related financed vehicle is not perfected.

SC’s quality control procedures include a title tracking system used to review and track title processing by dealers and state authorities until such time as the certificate of title has been received.

THE ASSET REPRESENTATIONS REVIEWER

Clayton Fixed Income Services LLC, a Delaware limited liability company (“Clayton”), has been appointed as asset representations reviewer pursuant to an agreement between the sponsor, the servicer, the issuing entity and the asset representations reviewer. Clayton is a wholly-owned subsidiary of Covius Services, LLC, and with its affiliates, has provided independent due diligence loan review and servicer oversight services since 1989. Clayton has been engaged as the asset representations reviewer on more than 500 auto and equipment loan, lease and dealer floorplan and credit card securitization transactions since 2015.

Clayton and its affiliates are leading providers of targeted due diligence reviews of securitized assets and policies and procedures of originators and servicers to assess compliance with representations and warranties, regulatory and legal requirements, investor guidelines and settlement agreements. Clayton and its affiliates have performed over 12 million loan reviews and provided ongoing oversight on over $2 trillion of securitization transactions on behalf of investors, sponsors, issuers and originators, including government sponsored enterprises and other governmental agencies. These services have been performed primarily on residential mortgage loan and residential mortgage-backed security transactions, although Clayton and its affiliates have also performed these services for transactions involving auto loans, credit cards, commercial mortgage loans, student loans, timeshare loans and boat and recreational vehicle loans.

 

46

The asset representations reviewer is not affiliated with the sponsor, the servicer, the depositor, the indenture trustee, the owner trustee or any of their affiliates, nor has the asset representations reviewer been hired by the sponsor or an underwriter to perform pre-closing due diligence work on the receivables. The asset representations reviewer may not resign unless (a) the asset representations reviewer is merged into or becomes an affiliate of the sponsor, the servicer, the depositor, the indenture trustee, the owner trustee or any person (or an affiliate of any person) hired by the sponsor or an underwriter to perform pre-closing due diligence work on the receivables, (b) upon determination that the performance of its duties under the asset representations review agreement is no longer permissible under applicable law or (c) if the asset representations reviewer does not receive payment in full of any amounts required to be paid to the asset representations reviewer for a period of 90 days after written notice of such failure is delivered by the asset representations reviewer to the issuing entity, the sponsor and the indenture trustee. Without limiting the foregoing, the asset representations reviewer must promptly resign if it is merged into or becomes an affiliate of the sponsor, the servicer, the depositor, the indenture trustee, the owner trustee, or any person (or an affiliate of any person) hired by the sponsor or an underwriter to perform pre-closing due diligence work on the receivables. Further, the indenture trustee may, or, at the direction of the noteholders evidencing a majority of the aggregate outstanding amount of the notes shall, terminate the rights and obligations of the asset representations reviewer upon the occurrence of one of the following events:

 

·

the asset representations reviewer becomes affiliated with (i) the sponsor, the depositor, the servicer, the indenture trustee, the owner trustee or any of their affiliates or (ii) any person that was engaged by the sponsor or any underwriter to perform any due diligence on the receivables prior to the closing date;

 

·

the asset representations reviewer breaches any of its representations, warranties, covenants or obligations made in the asset representations review agreement; or

 

·

a bankruptcy event with respect to the asset representations reviewer occurs.

Following the resignation or removal of the asset representations reviewer, (i) if the Delinquency Percentage has exceeded the Delinquency Trigger as of the most recent payment date, the indenture trustee (at the direction of the noteholders, provided, that if the indenture trustee has received conflicting or inconsistent requests from two or more groups of noteholders, each representing less than the majority of the Note Balance, the indenture trustee shall follow the direction of the noteholders representing the greater percentage of the Note Balance) or (ii) if the Delinquency Percentage has not exceeded the Delinquency Trigger as of the most recent payment date, the sponsor, will appoint a successor asset representations reviewer. If the asset representations reviewer has resigned or has been removed, replaced or substituted, or if a new asset representations reviewer has been appointed, then the depositor will specify on the Form 10-D filed after the Collection Period in which the event occurred the date of the event and the circumstances surrounding the resignation, removal, substitution or appointment, as applicable. The asset representations reviewer shall pay the expenses (including the fees and expenses of counsel) of transitioning the asset representations reviewer under the asset representations review agreement and preparing the successor asset representations reviewer to take on such obligations.

The asset representations reviewer will be responsible for reviewing the Subject Receivables (as defined under “The Transfer Agreements and the Administration Agreement—Asset Representations Review—Delinquency Trigger” below) for compliance with the representations and warranties made by the sponsor on the receivables if the conditions described below under “The Transfer Agreements and the Administration Agreement—Asset Representations Review” are satisfied. Under the asset representations review agreement, the asset representations reviewer will be entitled to be paid the fees and expenses set forth under “The Transfer Agreements and the Administration Agreement—Asset Representations Review—Fees and Expenses for Asset Review” below and will be indemnified as described under “The Transfer Agreements and the Administration Agreement—Asset Representations Review—Indemnification and Limitations of Liability of Asset Representations Reviewer” below. The asset representations reviewer is required to perform only those duties specifically required of it under the asset representations review agreement, as described under “The Transfer Agreements and the Administration Agreement—Asset Representations Review” below.

 

47

AFFILIATIONS AND CERTAIN RELATIONSHIPS

The following parties are all affiliates and are all direct or indirect subsidiaries of Banco Santander, S.A.: the depositor, Amherst Pierpont Securities LLC, as one of the underwriters,] and SC, as the originator, as servicer, as sponsor and as administrator. None of the indenture trustee, the owner trustee or the asset representations reviewer is an affiliate of any of the foregoing parties. Additionally, none of the indenture trustee, the owner trustee or the asset representations reviewer is an affiliate of one another.

THE RECEIVABLES POOL

The receivables consist of motor vehicle retail installment sale contracts and/or installment loans. These receivables are secured by a combination of new and used automobiles, light-duty trucks, SUVs and vans manufactured by a number of motor vehicle manufacturers. The receivables to be transferred to the issuing entity have been originated by the originator. See “The Originator” in this prospectus.

The characteristics of the receivables presented throughout this prospectus are based on the receivables as of the cut-off date, which were owned by SC and met the criteria set forth under “The Transfer Agreements and the Administration Agreement—Representations and Warranties” as of the cut-off date. As of the close of business on the cut-off date, the receivables to be transferred to the issuing entity on the closing date had an aggregate initial principal balance of $1,522,457,697.69 as of the cut-off date if the Base Transaction is issued and an aggregate initial principal balance of $2,214,921,522.87 as of the cut-off date if the Upsize Transaction is issued.

Each of the receivables were selected using selection procedures that were not known or intended by SC to be adverse to the issuing entity.

As of the cut-off date, receivables representing 100% of the Pool Balance were originated by SC. See “The Originator—Receivable Origination Channels” in this prospectus. All of the receivables are Simple Interest Receivables. See “—Calculation Methods” and “The Originator—Receivables and Calculation Methods” in this prospectus.

No expenses incurred in connection with the selection and acquisition of the receivables are to be payable from the offering proceeds.

There are no material direct or contingent claims that parties other than the secured parties under the indenture have regarding any receivables.

Calculation Methods

Each of the receivables included in the issuing entity property will be a Simple Interest Receivable, with respect to which the allocation of each payment between interest and principal is calculated using the Simple Interest Method.

Exceptions to Underwriting Criteria

As described above under “The Originator—Credit Risk Management and Underwriting”, SC utilizes a proprietary underwriting platform for loan originations. As described above under “The Originator—Credit Risk Management and Underwriting—Application Decisioning and Underwriting”, SC originates receivables considered by SC to be exceptions to SC’s underwriting guidelines.

 

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As of the cut-off date, if the Base Transaction is issued, 1,844 of the receivables, having an aggregate initial principal balance of $54,835,707.96 (approximately 3.60% of the principal balance of receivables in the pool as of the cut-off date), were considered by SC to be exceptions to SC’s underwriting guidelines:

 

Category of Policy Limit – One     Exception Only		Number of       Receivables				Aggregate Initial       Principal Balance ($)				Percentage of   Aggregate Initial   Principal Balance (%)
Max Payment-to-Income			319				$7,972,749.97				0.52	%
Max Debt-to-Income			39				$376,218.65				0.02	%
Max LTV			274				$6,509,894.92				0.43	%
Max Vehicle Age			1				$33,680.14				0.00%(	1)
Max Amount Financed			1				$97,850.56				0.01	%
Min Amount Financed			2				$6,442.93				0.00%(	1)
Max Mileage			4				$74,180.55				0.00%(	1)
Max Payment			172				$7,669,613.04				0.50	%
Max Backend			1,002				$30,901,497.55				2.03	%
Total			1,814				$53,642,128.31				3.52	%
(1) Less than 0.005% but greater than 0.00%.
Category of Policy Limit – More     Than One Exception		Number of       Receivables				Aggregate Initial       Principal Balance ($)				Percentage of   Aggregate Initial   Principal Balance (%)
Max Amount Financed and Max Payment			5				$355,986.17				0.02	%
Max LTV, Max Payment and Max Backend			2				$48,419.43				0.00%(	1)
Max Amount Financed, Max Payment and Max Backend			2				$99,827.14				0.01	%
Max Payment-to-Income and Max Backend			4				$117,959.80				0.01	%
Max LTV and Max Payment			1				$17,799.63				0.00%(	1)
Max Payment and Max Backend			16				$553,587.48				0.04	%
Total			30				$1,193,579.65				0.08	%

 

(1)	Less than 0.005% but greater than 0.00%.

 

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As of the cut-off date, if the Upsize Transaction is issued, 2,694 of the receivables, having an aggregate initial principal balance of $80,046,099.05 (approximately 3.61% of the principal balance of receivables in the pool as of the cut-off date), were considered by SC to be exceptions to SC’s underwriting guidelines:

 

Category of Policy Limit – One     Exception Only		Number of      Receivables				Aggregate Initial      Principal Balance ($)				Percentage of Aggregate Initial Principal Balance (%)
Max Payment-to-Income			449				$11,263,285.92				0.51	%
Max Debt-to-Income			62				$614,016.46				0.03	%
Max LTV			418				$9,869,840.41				0.45	%
Max Vehicle Age			2				$53,126.30				0.00%(	1)
Max Amount Financed			2				$189,911.38				0.01	%
Min Amount Financed			5				$18,508.22				0.00%(	1)
Max Mileage			6				$96,569.23				0.00%(	1)
Max Payment			261				$11,665,931.91				0.53	%
Max Backend			1,438				$44,128,980.45				1.99	%
Total			2,643				$77,900,170.28				3.52	%
(1) Less than 0.005% but greater than 0.00%.
Category of Policy Limit – More     Than One Exception		Number of      Receivables				Aggregate Initial      Principal Balance ($)				Percentage of Aggregate Initial Principal Balance (%)
Max Payment-to-Income and Max LTV			1				$23,018.64				0.00%(	1)
Max Payment-to-Income and Max Backend			5				$140,514.87				0.01	%
Max LTV, Max Payment and Max Backend			2				$48,419.43				0.00%(	1)
Max Amount Financed, Max Payment and Max Backend			4				$205,206.66				0.01	%
Max Amount Financed and Max Backend			1				$101,251.87				0.00%(	1)
Max Amount Financed and Max Payment			9				$637,526.42				0.03	%
Max LTV and Max Backend			1				$30,320.52				0.00%(	1)
Max LTV and Max Payment			2				$34,516.15				0.00%(	1)
Max Payment and Max Backend			26				$925,154.21				0.04	%
Total			51				$2,145,928.77				0.10	%

 

(1)	Less than 0.005% but greater than 0.00%.

Solely for determining whether a receivable was considered by SC to be an exception to its underwriting guidelines for purposes of the tables above, a receivable originated on or prior to August 31, 2017 is deemed an exception if it does not conform to the policy limits outlined in the most recent version of the Credit Guidelines and Loan Policy (without giving effect to the Pricing Decision Platform), even if that receivable was underwritten and originated in conformance with the underwriting policy in effect at the time of origination.

SC determined that receivables considered by SC to be exceptions to SC’s underwriting guidelines should be included in the receivables pool. SC elected to include those receivables because SC’s general practice is to securitize substantially all eligible assets in its portfolio using selection procedures that were not known or intended by SC to be adverse to the issuing entity, and the existence of an exception is not a selection criterion used to determine eligibility of a receivable for inclusion in the receivables pool. In addition, the information relating to delinquency, repossession and credit loss experience set forth in “—Delinquencies, Repossessions and Credit

 

50

Losses” and the securitized pool performance discussed in “—Information About Certain Previous Securitizations” is reflective of all receivables originated by SC.

Asset Level Information

The issuing entity has provided asset-level information regarding the receivables that will be owned by the issuing entity as of the closing date if the Base Transaction is issued and that will be owned by the issuing entity as of the closing date if the Upsize Transaction is issued (the “asset-level data”) as an exhibit to an applicable Form ABS-EE filed by the issuing entity by the date of filing of this prospectus, which is hereby incorporated by reference. The asset-level data comprises each of the data points required with respect to automobile loans identified on Schedule AL to Regulation AB and generally includes, with respect to each receivable, the related asset number, the reporting period covered, general information about the receivable, information regarding the related financed vehicle, information about the related obligor, information about activity on the receivable and information about modifications of the receivable during the reporting period. In addition, the issuing entity will provide updated asset-level data with respect to the receivables each month as an exhibit to the monthly distribution reports filed with the SEC on Form 10-D.

Pool Stratifications as of the Cut-off Date

The composition, distribution by loan-to-value ratio, FICO^® score, loan funded score, contract rate, geographic distribution by state of residence of the obligor, model year, original term to maturity, remaining term to maturity, original amount financed, current principal balance, vehicle make and original mileage of the receivables in the pool as of the cut-off date if the Base Transaction is issued and in the pool as of the cut-off date if the Upsize Transaction is issued are set forth in the tables below.

 

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Composition of the Pool of Receivables if the Base Transaction is Issued

As of the Cut-off Date

 

New

Used

Total

Aggregate Outstanding Principal Balance

$368,107,687.39

$1,154,350,010.30

$1,522,457,697.69

Number of Receivables

12,380

48,850

61,230

Percentage of Aggregate Outstanding Principal Balance

24.18%

75.82%

100.00%

Average Outstanding Principal Balance

$29,734.06

$23,630.50

$24,864.57

Range of Outstanding Principal Balances

$664.68 to $99,895.02

$503.05 to $99,348.84

$503.05 to $99,895.02

Weighted Average Contract Rate(1)

11.75%

15.67%

14.72%

Range of Contract Rates

0.00% to 29.99%

0.00% to 29.99%

0.00% to 29.99%

Weighted Average Remaining Term(1)

65 months

67 months

66 months

Range of Remaining Terms(2)

4 months to 75 months

4 months to 75 months

4 months to 75 months

Weighted Average Original Term(1)

72 months

71 months

71 months

Range of Original Terms(2)

24 months to 75 months

24 months to 75 months

24 months to 75 months

 

 

(1)	Weighted by outstanding principal balance as of the cut-off date.

(2)	Characteristics in the table related to the term of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how term is calculated for the securitized pool and how term is required to be calculated for asset-level data.

Composition of the Pool of Receivables if the Upsize Transaction is Issued

As of the Cut-off Date

 

New

Used

Total

Aggregate Outstanding Principal Balance

$538,592,541.04

$1,676,328,981.83

$2,214,921,522.87

Number of Receivables

18,079

70,974

89,053

Percentage of Aggregate Outstanding Principal Balance

24.32%

75.68%

100.00%

Average Outstanding Principal Balance

$29,791.06

$23,618.92

$24,871.95

Range of Outstanding Principal Balances

$500.88 to $101,251.87

$503.05 to $102,537.60

$500.88 to $102,537.60

Weighted Average Contract Rate(1)

11.73%

15.68%

14.72%

Range of Contract Rates

0.00% to 29.99%

0.00% to 29.99%

0.00% to 29.99%

Weighted Average Remaining Term(1)

65 months

67 months

66 months

Range of Remaining Terms(2)

4 months to 75 months

4 months to 75 months

4 months to 75 months

Weighted Average Original Term(1)

72 months

71 months

71 months

Range of Original Terms(2)

24 months to 75 months

12 months to 75 months

12 months to 75 months

 

 

(1)	Weighted by outstanding principal balance as of the cut-off date.

(2)	Characteristics in the table related to the term of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how term is calculated for the securitized pool and how term is required to be calculated for asset-level data.

 

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Distribution of the Pool of Receivables if the Base Transaction is Issued

By Loan-to-Value Ratio

As of the Cut-off Date

 

LTV Range(1)		Number of  Receivables				Percentage of Total Number of Receivables(2)				Aggregate Outstanding Principal Balance				Percentage of Total Aggregate Outstanding Principal Balance(2)
Less than 100.00%			21,195				34.62	%		$	496,080,936.19				32.58	%
100.00% - 109.99%			13,826				22.58				364,952,225.18				23.97
110.00% - 119.99%			13,372				21.84				351,318,224.45				23.08
120.00% - 129.99%			7,017				11.46				173,474,403.51				11.39
130.00% - 139.99%			5,316				8.68				124,488,774.56				8.18
140.00% - 149.99%			502				0.82				12,122,858.36				0.80
150.00% and greater			2				0.00	(3)			20,275.44				0.00	(3)
Total			61,230				100.00	%		$	1,522,457,697.69				100.00	%

 

 

(1)

LTV for receivables originated by SC is calculated using total amount financed, which may include taxes, title fees and ancillary products, over the “value” of the financed vehicle. The “value” of the financed vehicle means, (i) with respect to new vehicles, either the invoice price or MSRP of the financed vehicle, (ii) with respect to used vehicles (other than as set forth in clause (iii)), the book value of the financed vehicle and (iii) with respect to used vehicles originated through pass-through arrangements in place with certain third parties, the sales prices of the financed vehicle. The “value” of the financed vehicle may not be reflective of the market value of the financed vehicle at any time.

(2)	Sum of percentages may not equal 100% due to rounding.

(3)	Less than 0.005% but greater than 0.00%.

Distribution of the Pool of Receivables if the Upsize Transaction is Issued

By Loan-to-Value Ratio

As of the Cut-off Date

 

LTV Range(1)		Number of   Receivables				Percentage of Total Number of Receivables(2)				Aggregate Outstanding Principal Balance				Percentage of Total Aggregate Outstanding Principal Balance(2)
Less than 100.00%			30,848				34.64	%		$	722,643,868.14				32.63	%
100.00% - 109.99%			20,096				22.57				531,550,415.75				24.00
110.00% - 119.99%			19,404				21.79				509,577,516.73				23.01
120.00% - 129.99%			10,159				11.41				252,214,656.85				11.39
130.00% - 139.99%			7,795				8.75				181,088,997.27				8.18
140.00% - 149.99%			741				0.83				17,685,809.57				0.80
150.00% and greater			10				0.01				160,258.56				0.01
Total			89,053				100.00	%		$	2,214,921,522.87				100.00	%

 

 

(1)

LTV for receivables originated by SC is calculated using total amount financed, which may include taxes, title fees and ancillary products, over the “value” of the financed vehicle. The “value” of the financed vehicle means, (i) with respect to new vehicles, either the invoice price or MSRP of the financed vehicle, (ii) with respect to used vehicles (other than as set forth in clause (iii)), the book value of the financed vehicle and (iii) with respect to used vehicles originated through pass-through arrangements in place with certain third parties, the sales prices of the financed vehicle. The “value” of the financed vehicle may not be reflective of the market value of the financed vehicle at any time.

(2)	Sum of percentages may not equal 100% due to rounding.

 

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Distribution of the Pool of Receivables if the Base Transaction is Issued

By FICO^® Score

As of the Cut-off Date

 

FICO® Score Range(1)		Percentage of Total Aggregate Outstanding Principal Balance(2)
301 – 350		0.00%(3)
351 – 400		0.03
401 – 450		0.77
451 – 500		4.77
501 – 550		15.12
551 – 600		25.63
601 – 650		27.14
651 and higher		17.96
Null FICO® Score		8.59
Total		100.00%

 

(1)

FICO® is a federally registered trademark of Fair Isaac Corporation. The FICO® score information in the table above was obtained at origination of the applicable receivables and does not reflect the FICO® scores of the obligors as of the cut-off date. A FICO® score is a measurement determined by Fair Isaac Corporation using information collected by the major credit bureaus to assess credit risk. FICO® scores should not necessarily be relied upon as a meaningful predictor of the performance of the receivables. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables” in this prospectus.

(2)	Sum of percentages may not equal 100% due to rounding.

(3)	Less than 0.005% but greater than 0.00%.

Distribution of the Pool of Receivables if the Upsize Transaction is Issued

By FICO^® Score

As of the Cut-off Date

 

FICO® Score Range(1)		Percentage of Total Aggregate Outstanding Principal  Balance(2)
350 – 350		0.00%(3)
351 – 400		0.03
401 – 450		0.75
451 – 500		4.73
501 – 550		15.04
551 – 600		25.81
601 – 650		26.96
651 and higher		18.00
Null FICO® Score		8.68
Total		100.00%

 

 

(1)

FICO® is a federally registered trademark of Fair Isaac Corporation. The FICO® score information in the table above was obtained at origination of the applicable receivables and does not reflect the FICO® scores of the obligors as of the cut-off date. A FICO® score is a measurement determined by Fair Isaac Corporation using information collected by the major credit bureaus to assess credit risk. FICO® scores should not necessarily be relied upon as a meaningful predictor of the performance of the receivables. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables” in this prospectus.

(2)	Sum of percentages may not equal 100% due to rounding.

(3)	Less than 0.005% but greater than 0.00%.

 

54

Distribution of the Pool of Receivables if the Base Transaction is Issued

By Loan Funded Score

As of the Cut-off Date

 

SC Loan     Funded Score Range(1)		Percentage of Total     Aggregate Outstanding     Principal Balance(2)
450 and lower		9.84%
451 – 500		20.07
501 – 550		32.17
551 – 600		21.04
601 – 650		10.05
651 – 700		3.77
701 – 750		1.76
751 and higher		1.28
Total		100.00%

 

 

(1)

The loan funded score (formerly known as the loss forecasting score) is a proprietary score used by SC. Under SC’s scoring model, a loan funded score ranges from 1 to 999, with a score of 1 indicating a very high predicted likelihood of loss and a score of 999 indicating a very low predicted likelihood of loss. The range of scores for SC’s proprietary loan funded scoring system is not comparable to a score from a credit bureau or a FICO® score. Further, a loan funded score may not be an accurate predictor of the likely risk or quality of the related receivable. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables” in this prospectus.

(2)	Sum of percentages may not equal 100% due to rounding.

Distribution of the Pool of Receivables if the Upsize Transaction is Issued

By Loan Funded Score

As of the Cut-off Date

 

SC Loan         Funded Score Range(1)		Percentage of Total     Aggregate Outstanding     Principal Balance(2)
450 and lower		9.79%
451 – 500		20.09
501 – 550		32.25
551 – 600		20.90
601 – 650		10.02
651 – 700		3.89
701 – 750		1.76
751 and higher		1.30
Total		100.00%

 

 

(1)

The loan funded score (formerly known as the loss forecasting score) is a proprietary score used by SC. Under SC’s scoring model, a loan funded score ranges from 1 to 999, with a score of 1 indicating a very high predicted likelihood of loss and a score of 999 indicating a very low predicted likelihood of loss. The range of scores for SC’s proprietary loan funded scoring system is not comparable to a score from a credit bureau or a FICO® score. Further, a loan funded score may not be an accurate predictor of the likely risk or quality of the related receivable. See “Risk Factors—The characteristics, servicing and performance of the receivables pool could result in delays in payment or losses on your notes—Credit scores, loan funded scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables” in this prospectus.

(2)	Sum of percentages may not equal 100% due to rounding.

 

55

Distribution of the Pool of Receivables if the Base Transaction is Issued

By Contract Rate

As of the Cut-off Date

 

Contract Rate Range		Number of       Receivables				Percentage of       Total Number of       Receivables(1)				Aggregate Outstanding       Principal Balance				Percentage of       Total Aggregate Outstanding Principal Balance(1)
Less than 0.001%			150				0.24	%		$	6,204,834.78				0.41	%
0.001% - 1.000%			53				0.09				2,119,310.80				0.14
1.001% - 2.000%			176				0.29				7,350,142.89				0.48
2.001% - 3.000%			122				0.20				3,252,320.84				0.21
3.001% - 4.000%			372				0.61				8,108,321.78				0.53
4.001% - 5.000%			523				0.85				18,048,489.05				1.19
5.001% - 6.000%			723				1.18				20,216,384.74				1.33
6.001% - 7.000%			1,498				2.45				36,828,944.44				2.42
7.001% - 8.000%			2,428				3.97				66,022,822.24				4.34
8.001% - 9.000%			2,995				4.89				81,983,006.76				5.38
9.001% - 10.000%			3,251				5.31				92,064,297.40				6.05
10.001% - 11.000%			3,378				5.52				94,319,522.11				6.20
11.001% - 12.000%			3,586				5.86				101,220,494.75				6.65
12.001% - 13.000%			3,617				5.91				100,695,745.14				6.61
13.001% - 14.000%			3,535				5.77				96,824,128.27				6.36
14.001% - 15.000%			3,214				5.25				85,845,463.70				5.64
15.001% - 16.000%			3,512				5.74				90,129,400.35				5.92
16.001% - 17.000%			3,828				6.25				93,557,961.90				6.15
17.001% - 18.000%			4,810				7.86				108,439,916.78				7.12
18.001% - 19.000%			2,957				4.83				63,334,080.05				4.16
19.001% - 20.000%			2,418				3.95				52,037,245.96				3.42
20.001% - 21.000%			3,284				5.36				69,624,620.48				4.57
21.001% - 22.000%			1,989				3.25				41,892,707.98				2.75
22.001% - 23.000%			1,889				3.09				41,395,103.28				2.72
23.001% - 24.000%			2,159				3.53				45,270,783.88				2.97
24.001% - 25.000%			2,216				3.62				45,673,239.51				3.00
25.001% - 26.000%			805				1.31				16,723,030.98				1.10
26.001% - 27.000%			639				1.04				12,627,179.54				0.83
27.001% - 28.000%			621				1.01				10,875,329.45				0.71
28.001% - 29.000%			257				0.42				5,181,405.24				0.34
29.001% - 30.000%			225				0.37				4,591,462.62				0.30
Total			61,230				100.00	%		$	1,522,457,697.69				100.00	%

 

(1)	Sum of percentages may not equal 100% due to rounding.

 

56