424B5 1 d345750d424b5.htm 424B5 424B5
Table of Contents

Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-206684
and 333-206684-04

 

PROSPECTUS

 

LOGO

$976,740,000

Santander Drive Auto Receivables Trust 2017-1

Issuing Entity

Central Index Key Number: 0001696935

 

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

 

You should carefully read the risk factors set forth under “Risk Factors” beginning on page 13 of this prospectus.

The notes are asset backed securities. The notes will be the obligation solely of the issuing entity and will not be obligations of or guaranteed by Santander Consumer USA Inc., Santander Drive Auto Receivables LLC, the underwriters or any of their affiliates.

Santander Drive Auto Receivables Trust 2017-1 will issue the following asset-backed notes:

 

     Principal
Balance(2)
     Offered
Amount
     Interest
Rate
  Final Scheduled
Payment Date
     Price to Public(3)   Underwriting
Discount(4)
  Proceeds to
the Depositor
Class A-1 Notes    $ 194,000,000      $ 184,300,000      0.95000%     March 15, 2018      100.00000%   0.140%   99.86000%
Class A-2 Notes      310,000,000        294,500,000      1.49%     February 18, 2020      99.99717%   0.170%   99.82717%
Class A-3 Notes      111,670,000        106,080,000      1.77%     September 15, 2020      99.99931%   0.200%   99.79931%
Class B Notes      129,750,000        123,260,000      2.10%     June 15, 2021      99.99233%   0.400%   99.59233%
Class C Notes      156,670,000        148,830,000      2.58%     May 16, 2022      99.99714%   0.440%   99.55714%
Class D Notes      126,080,000        119,770,000      3.17%     April 17, 2023      99.98304%   0.600%   99.38304%
Class E Notes(1)      48,960,000         5.05%     July 15, 2024         
  

 

 

    

 

 

         

 

 

 

 

 

Total

   $ 1,077,130,000      $ 976,740,000           $976,696,910.13   $2,837,342.00   $973,859,568.13
  

 

 

    

 

 

         

 

 

 

 

 

 

(1) The Class E notes are not being offered hereby and are anticipated to be either privately placed or retained by the depositor or another affiliate of SC, subject to the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention” in this prospectus, but will be entitled to certain payments as described herein.
(2) 5% of the initial Note Balance of each class of notes will be retained by the depositor or one or more other majority-owned affiliates of SC (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) to satisfy the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention” in this prospectus and is not being offered hereunder.
(3)  Plus accrued interest, if any, from the closing date.
(4)  In connection with the offering of the offered notes, one or more of the underwriters have agreed to reimburse the issuing entity $511,625 for certain fees and expenses.
  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 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 is not a business day, the next business day, starting on March 15, 2017.
  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 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

 

Citigroup   Barclays   J.P. Morgan

Solely with respect to the Class A notes:

MUFG   Santander   SOCIETE GENERALE

The date of this prospectus is February 23, 2017.


Table of Contents

TABLE OF CONTENTS

 

     Page  

WHERE TO FIND INFORMATION IN THIS PROSPECTUS

     v   

REPORTS TO NOTEHOLDERS

     vi   

NOTICE TO RESIDENTS OF THE UNITED KINGDOM

     vii   

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

     vii   

NOTICE TO RESIDENTS OF CANADA

     viii   

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

     6   

PRIORITY OF PAYMENTS

     7   

CREDIT ENHANCEMENT

     8   

TAX STATUS

     10   

CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. BENEFIT PLANS

     10   

MONEY MARKET INVESTMENT

     10   

CREDIT RISK RETENTION

     10   

EU RISK RETENTION

     11   

CERTAIN VOLCKER RULE CONSIDERATIONS

     11   

RATINGS

     11   

REGISTRATION UNDER THE SECURITIES ACT

     11   

CONFLICTS OF INTEREST

     12   

RISK FACTORS

     13   

USE OF PROCEEDS

     31   

THE ISSUING ENTITY

     31   

Limited Purpose and Limited Assets

     31   

Capitalization and Liabilities of the Issuing Entity

     32   

The Issuing Entity Property

     32   

THE TRUSTEES

     33   

The Owner Trustee

     33   

Resignation or Removal of the Owner Trustee

     33   

The Indenture Trustee

     34   

Role of the Owner Trustee and Indenture Trustee

     35   

THE DEPOSITOR

     35   

THE SPONSOR

     36   

Credit Risk Retention

     37   

EU Risk Retention

     37   

THE ORIGINATOR

     38   

Receivables and Calculation Methods

     38   

Receivable Origination Channels

     39   

Underwriting

     39   

Credit Risk Management

     39   

THE SERVICER

     41   

 

i


Table of Contents

TABLE OF CONTENTS

(continued)

 

     Page  

SERVICING BY SC

     42   

Perfection of Security Interests

     45   

Insurance

     45   

Prior Securitization Transactions

     45   

THE ASSET REPRESENTATIONS REVIEWER

     45   

AFFILIATIONS AND CERTAIN RELATIONSHIPS

     46   

THE RECEIVABLES POOL

     46   

Calculation Methods

     47   

Characteristics of the Receivables

     47   

Exceptions to Underwriting Criteria

     47   

Asset Level Information

     48   

Pool Stratifications

     48   

Composition of the Pool of Receivables As of the Cut-off Date

     49   

Delinquencies, Repossessions and Credit Losses

     57   

Credit Loss Experience

     59   

Delinquency Experience Regarding the Pool of Receivables

     59   

Information About Certain Previous Securitizations

     60   

Review of Pool Assets

     61   

Repurchases and Replacements

     62   

MATURITY AND PREPAYMENT CONSIDERATIONS

     62   

THE NOTES

     75   

General

     75   

Delivery of Notes

     75   

Book-Entry Registration

     75   

Definitive Notes

     76   

Notes Owned by Transaction Parties

     76   

Access to Noteholder Lists

     77   

Statements to Noteholders

     77   

Payments of Interest

     78   

Payments of Principal

     79   

THE TRANSFER AGREEMENTS AND THE ADMINISTRATION AGREEMENT

     81   

Sale and Assignment of Receivables

     81   

Representations and Warranties

     81   

Asset Representations Review

     82   

Requests to Repurchase and Dispute Resolution

     85   

Administration Agreement

     87   

Amendment Provisions

     87   

Accounts

     88   

Deposits to the Collection Account

     88   

Reserve Account

     88   

Priority of Payments

     89   

Overcollateralization

     91   

Excess Interest

     91   

Optional Redemption

     91   

Fees and Expenses

     92   

Indemnification of Indenture Trustee and the Owner Trustee

     92   

Collection and Other Servicing Procedures

     92   

Servicing Compensation and Expenses

     93   

Collection, Extensions and Modifications of Receivables

     93   

Realization Upon Defaulted Receivables

     94   

Servicer Replacement Events

     94   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

Resignation, Removal or Replacement of the Servicer

     95  

Waiver of Past Servicer Replacement Events

     96  

Back-up Servicing

     96  

Evidence as to Compliance

     96  

THE INDENTURE

     97  

Material Covenants

     97  

Noteholder Communication; List of Noteholders

     97  

Annual Compliance Statement

     98  

Indenture Trustee’s Annual Report

     98  

Documents by Indenture Trustee to Noteholders

     98  

Satisfaction and Discharge of Indenture

     99  

Resignation or Removal of the Indenture Trustee

     99  

Events of Default

     99  

Rights Upon Event of Default

     100  

Priority of Payments Will Change Upon Events of Default that Result in Acceleration

     101  

Amendment Provisions

     103  

MATERIAL LEGAL ASPECTS OF THE RECEIVABLES

     104  

Rights in the Receivables

     104  

Security Interests in the Financed Vehicles

     105  

Repossession

     107  

Notice of Sale; Redemption Rights

     107  

Deficiency Judgments and Excess Proceeds

     108  

Consumer Protection Law

     108  

Consumer Financial Protection Bureau

     109  

Certain Matters Relating to Bankruptcy

     110  

Repurchase Obligation

     111  

Servicemembers Civil Relief Act

     111  

Other Limitations

     111  

Dodd Frank Orderly Liquidation Framework

     112  

LEGAL INVESTMENT

     114  

Money Market Investment

     114  

Certain Volcker Rule Considerations

     114  

Requirements for Certain European Regulated Investors and Affiliates

     114  

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

     115  

The Issuing Entity

     117  

The Notes

     117  

Foreign Account Compliance Act

     120  

Possible Alternative Treatments of the Notes and the Issuing Entity

     120  

TAX SHELTER DISCLOSURE AND INVESTOR LIST REQUIREMENTS

     121  

STATE AND LOCAL TAX CONSEQUENCES

     121  

CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. BENEFIT PLANS

     122  

UNDERWRITING

     123  

Conflicts of Interest

     125  

Offering Restrictions

     126  

United Kingdom

     126  

European Economic Area

     126  

FORWARD-LOOKING STATEMENTS

     126  

LEGAL PROCEEDINGS

     127  

LEGAL MATTERS

     127  

 

iii


Table of Contents

TABLE OF CONTENTS

(continued)

 

     Page  

GLOSSARY

     128   

INDEX

     134   

APPENDIX A Static Pool Information About Certain Previous Securitizations

     A-1   

 

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WHERE TO FIND INFORMATION IN THIS PROSPECTUS

This prospectus provides information about the issuing entity, Santander Drive Auto Receivables Trust 2017-1, 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 dates stated on its 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 134 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.

 

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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.ctslink.com. Assistance in using this Internet website may be obtained by calling the indenture trustee’s customer service desk at (866) 846-4526. 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 2017-1” and file number 333-206684-04.

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 Registration Statement is available for inspection without charge at the public reference facilities maintained at the SEC’s Public Reference Room, located at 100 F Street N.E., Washington, D.C. 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also 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.

 

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NOTICE TO RESIDENTS OF THE UNITED KINGDOM

THIS PROSPECTUS MAY ONLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED IN THE UNITED KINGDOM TO PERSONS AUTHORIZED TO CARRY ON A REGULATED ACTIVITY UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (“FSMA”), OR TO PERSONS OTHERWISE 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 UNITED KINGDOM AND NO ONE 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 UNITED KINGDOM OTHER THAN PERSONS IN THE CATEGORIES STATED ABOVE IS UNAUTHORIZED AND MAY CONTRAVENE THE FSMA.

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

THIS PROSPECTUS IS NOT A PROSPECTUS FOR THE PURPOSE OF THE PROSPECTUS DIRECTIVE (AS DEFINED BELOW). THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFERS OF NOTES IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A “RELEVANT MEMBER STATE”) WILL BE MADE PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS DIRECTIVE FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF NOTES. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN A RELEVANT MEMBER STATE OF NOTES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE IN RELATION TO SUCH OFFER. 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 CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS FOR SUCH OFFER. THE EXPRESSION “PROSPECTUS DIRECTIVE” MEANS DIRECTIVE 2003/71/EC (AS AMENDED, INCLUDING BY DIRECTIVE 2010/73/EU), AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE IN THE RELEVANT MEMBER STATE.

 

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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.

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.

 

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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

 

LOGO

 

(1)  Neither the Class E notes nor the certificates are being offered hereby.
(2)  5% of the initial Note Balance of each class of notes (including the Class E Notes) and at least 5% of the aggregate Percentage Interests in the certificates will be retained by the depositor or one or more other majority-owned affiliates of SC (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) to satisfy the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention” in this prospectus and are not being offered hereunder.

 

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Flow of Funds(1)

(Prior to an Acceleration after an Event of Default)

 

LOGO

 

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

 

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Table of Contents

SUMMARY OF TERMS

This summary provides an overview of selected information from this prospectus and does not contain all of the information that you need to consider in making your investment decision. This summary provides an overview of certain information to aid your understanding. You should carefully read this entire prospectus to understand all of the terms of this offering.

 

THE PARTIES

Issuing Entity

Santander Drive Auto Receivables Trust 2017-1, a Delaware statutory trust, will be the “issuing entity” of the notes. The principal assets of the issuing entity will be a pool of receivables, which are motor vehicle retail installment sale contracts and/or installment loans secured by new and used automobiles, light-duty trucks and vans.

Depositor

Santander Drive Auto Receivables LLC, a Delaware limited liability company and a wholly-owned special purpose subsidiary of SC, is the “depositor.” The depositor will sell the receivables to the issuing entity.

You may contact the depositor by mail at 1601 Elm Street, Suite 800, Dallas, Texas 75201, or by calling (214) 292-1930.

Sponsor

Santander Consumer USA Inc., an Illinois corporation, known as “SC” is the “sponsor” of the transaction described in this prospectus.

Servicer

SC or the “servicer,” will service the receivables held by the issuing entity and the servicer will be entitled to receive a servicing fee for each collection period. The “servicing fee” for any payment date will be an amount equal to the product of (1) 3.00%; (2) one-twelfth; and (3) the pool balance as of the first day of the related collection period (or as of the cut-off date, in the case of the first payment date). As additional compensation, the servicer will be entitled to retain all supplemental servicing fees and investment earnings (net of investment losses and expenses) from amounts on deposit in the collection account and the reserve account. The servicing fee, together with any portion of the servicing fee that remains unpaid from prior payment dates, will be payable on each payment date from funds on deposit

in the collection account with respect to the collection period preceding such payment date, including funds, if any, deposited into the collection account from the reserve account.

Originator

SC is the “originator” of the receivables. SC, as “seller,” will sell all of the receivables to be included in the receivables pool to the depositor and the depositor will sell those receivables to the issuing entity.

Administrator

SC will be the “administrator” of the issuing entity, and in such capacity will provide administrative and ministerial services for the issuing entity.

Trustees

Wilmington Trust, National Association, a national banking association, will be the “owner trustee.”

Wells Fargo Bank, National Association, a national banking association, will be the “indenture trustee.”

Asset Representations Reviewer

Clayton Fixed Income Services LLC, a Delaware limited liability company, will be the “asset representations reviewer.”

 

 



 

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Table of Contents

THE OFFERED NOTES

The issuing entity will issue and offer the following notes:

 

Class

  Initial Note Principal
Balance(1)
    Interest
Rate
    Final Scheduled
Payment Date

Class A-1 Notes

  $ 194,000,000       0.95000   March 15, 2018

Class A-2 Notes

    310,000,000       1.49   February 18, 2020

Class A-3 Notes

    111,670,000       1.77   September 15, 2020

Class B Notes

    129,750,000       2.10   June 15, 2021

Class C Notes

    156,670,000       2.58   May 16, 2022

Class D Notes

    126,080,000       3.17   April 17, 2023

 

(1)  5% of the initial Note Balance of each class of notes (including the Class E Notes) will be retained by the depositor or one or more other majority-owned affiliates of SC (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) to satisfy the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention in this prospectus and is not being offered hereunder. $184,300,000 of the Class A-1 Notes, $294,500,000 of the Class A-2 Notes, $106,080,000 of the Class A-3 Notes, $123,260,000 of the Class B Notes, $148,830,000 of the Class C Notes and $119,770,000 of the Class D Notes is being offered hereunder.

The issuing entity will also issue $48,960,000 of Class E 5.05% asset-backed notes, which are not being offered by this prospectus. The final scheduled payment date for the Class E notes is July 15, 2024. The Class E notes are not being publicly registered and are anticipated to be either privately placed or retained by the depositor or another affiliate of SC, subject to the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention in this prospectus. Information about the Class E notes is set forth herein solely to provide a better understanding of the Class A notes, Class B notes, Class C notes and Class D notes.

We refer to the Class A-1 notes, the Class A-2 notes and the Class A-3 notes as the “Class A notes.” We refer to the Class A notes, the Class B notes, the Class C notes, the Class D notes and the Class E notes, collectively, as the “notes.” The Class A notes, the Class B notes, the Class C notes and the Class D notes, which we refer to as the “offered notes,” are the only securities that are being offered by this prospectus.

The offered notes are issuable in a minimum denomination of $1,000 and integral multiples of $1,000 in excess thereof. The Class E notes are issuable in a minimum denomination of $1,300,000, and in integral multiples of $1,000 in excess thereof. See “The Notes—Delivery of the Notes” in this prospectus.

The issuing entity expects to issue the notes on or about February 28, 2017, which we refer to as the “closing date.”

THE CERTIFICATES

On the closing date, the issuing entity will issue subordinated and non-interest bearing “certificates” in a nominal aggregate principal amount of $100,000, which represent the equity interest in the issuing entity and are not offered hereby. The holders of the certificates, or “certificateholders”, will be entitled on each payment date only to amounts remaining after payments on the notes and payments of issuing entity expenses and other required amounts on such payment date. The certificates will initially be held by the depositor, but the depositor may transfer all or a portion of the certificates to one of its affiliates or sell all or a portion of the certificates on or after the closing date. However, the portion of the certificates retained by the depositor to satisfy U.S. and EU credit risk retention rules will not be sold or transferred except as permitted under those rules. See “ Credit Risk Retention” and “ EU Risk Retention

INTEREST AND PRINCIPAL

To the extent available, the issuing entity will pay interest and principal on the notes monthly, on the 15th day of each month (or, if that day is not a business day, on the next business day), which we refer to as the “payment date.” The first payment date is March 15, 2017. On each payment date, payments on the notes will be made to holders of record as of the close of business on the business day immediately preceding that payment date (except in limited circumstances where definitive notes are issued), which we refer to as the “record date.”

Interest Payments

Interest on the Class A-1 notes will accrue from and including the prior payment date (or with respect to the first payment date, from and including the closing date) to but excluding the following payment date and will be due and payable on each payment date.

Interest on the Class A-2 notes, the Class A-3 notes, the Class B notes, the Class C notes, the Class D notes and the Class E notes will accrue from and including the 15th day of the calendar month preceding a payment date (or, with respect to the first payment date, from and including the closing date) to but excluding the 15th day of the month in which the

 

 



 

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payment date occurs and will be due and payable on each payment date.

Interest due and accrued as of any payment date but not paid on such payment date will be due on the next payment date, together with interest on such unpaid amount at the applicable interest rate (to the extent lawful).

The issuing entity will pay interest on the Class A-1 notes on the basis of the actual number of days elapsed during the period for which interest is payable and a 360-day year. This means that the interest due on each payment date for the Class A-1 notes will be the product of: (i) the outstanding principal balance of the Class A-1 notes, (ii) the related interest rate and (iii) the actual number of days from and including the previous payment date (or, in the case of the first payment date, from and including the closing date) to but excluding the current payment date, divided by 360.

The issuing entity will pay interest on the Class A-2 notes, the Class A-3 notes, the Class B notes, the Class C notes, the Class D notes and the Class E notes on the basis of a 360-day year consisting of twelve 30-day months. This means that the interest due on each payment date for the Class A-2 notes, the Class A-3 notes, the Class B notes, the Class C notes, the Class D notes and the Class E notes will be the product of (i) the outstanding principal balance of the related class of notes, (ii) the related interest rate and (iii) 30 (or, in the case of the first payment date, the number of days from and including the closing date to but excluding March 15, 2017 (assuming a 30-day calendar month)), divided by 360. Interest payments on all Class A notes will have the same priority. Interest payments on the Class B notes will be subordinated to interest payments and, in specified circumstances, principal payments on the Class A notes. Interest payments on the Class C notes will be subordinated to interest payments and, in specified circumstances, principal payments on the Class A notes and the Class B notes. Interest payments on the Class D notes will be subordinated to interest payments and, in specified circumstances, principal payments on the Class A notes, the Class B notes and the Class C notes. Interest payments on the Class E notes will be subordinated to interest payments and, in specified circumstances, principal payments on the Class A notes, the Class B notes, the Class C notes and the Class D notes.

A failure to pay the interest due on the notes of the Controlling Class on any payment date that continues

for a period of five business days or more will result in an event of default.

Principal Payments

The issuing entity will generally pay principal sequentially to the earliest maturing class of notes monthly on each payment date in accordance with the payment priorities described below under “ Priority of Payments.”

The issuing entity will make principal payments of the notes based on the amount of collections and defaults on the receivables during the prior collection period. This prospectus describes how available funds and amounts on deposit in the reserve account are allocated to principal payments of the notes.

On each payment date prior to the acceleration of the notes following an event of default, which is described below under “Payment of Principal and Interest after an Event of Default,” the issuing entity will distribute funds available to pay principal of the notes as follows:

 

(1) first, to the Class A-1 noteholders until the Class A-1 notes are paid in full;

 

(2) second, to the Class A-2 noteholders until the Class A-2 notes are paid in full;

 

(3) third, to the Class A-3 noteholders until the Class A-3 notes are paid in full;

 

(4) fourth, to the Class B noteholders until the Class B notes are paid in full;

 

(5) fifth, to the Class C noteholders until the Class C notes are paid in full;

 

(6) sixth, to the Class D noteholders until the Class D notes are paid in full; and

 

(7) seventh, to the Class E noteholders until the Class E notes are paid in full.

All unpaid principal of a class of notes will be due on the final scheduled payment date for that class.

Payment of Principal and Interest after an Event of Default

After an event of default under the indenture occurs and the notes are accelerated, the priority of payments of principal and interest will change from

 

 



 

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the description in “Interest Payments” above,“Principal Payments” above and “Priority of Payments” below. The priority of payments of principal and interest after an event of default under the indenture and acceleration of the notes will depend on the nature of the event of default.

On each payment date after an event of default under the indenture occurs and the notes are accelerated (as a result of a payment default or a bankruptcy event relating to the issuing entity), after payment of certain amounts to the trustees, the servicer and the asset representations reviewer, interest on the Class A notes will be paid ratably to each class of Class A notes and then principal payments will be made first to Class A-1 noteholders until the Class A-1 notes are paid in full. Next, the noteholders of the Class A-2 notes and the Class A-3 notes will receive principal payments, ratably, based on the aggregate outstanding principal balance of each remaining class of Class A notes until each such class of notes is paid in full. After interest on and principal of all of the Class A notes are paid in full, interest and principal payments will be made to noteholders of the Class B notes. After interest on and principal of all of the Class B notes are paid in full, interest and principal payments will be made to noteholders of the Class C notes. After interest on and principal of all of the Class C notes are paid in full, interest and principal payments will be made to noteholders of the Class D notes. After interest on and principal of all of the Class D notes are paid in full, interest and principal payments will be made to noteholders of the Class E notes.

On each payment date after an event of default under the indenture occurs and the notes are accelerated as the result of the issuing entity’s breach of a covenant (other than a payment default), representation or warranty, after payment of certain amounts to the trustees, the servicer and the asset representations reviewer, interest on the Class A notes will be paid ratably to each class of Class A notes followed by interest on the Class B notes, the Class C notes, the Class D notes and the Class E notes, sequentially. Principal payments will then be made first to the Class A-1 noteholders until the Class A-1 notes are paid in full. Next, the noteholders of the Class A-2 notes and the Class A-3 notes will receive principal payments, ratably, based on the outstanding principal balance of the Class A-2 notes and the Class A-3 notes until each such class is paid in full. Next, the Class B noteholders will receive principal payments until the Class B notes are paid in full. After the Class B notes are paid in full, principal payments will be made to the Class C noteholders until the Class C notes are paid in full. After the Class C

notes are paid in full, principal payments will be made to the Class D noteholders until the Class D notes are paid in full. After the Class D notes are paid in full, principal payments will be made to the Class E noteholders until the Class E notes are paid in full. Payments of the foregoing amounts will be made from available funds and other amounts, including all amounts held on deposit in the reserve account.

See “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration” in this prospectus.

If an event of default has occurred but the notes have not been accelerated, then interest and principal payments will be made in the priority set forth below under “Priority of Payments.”

Optional Redemption of the Notes

The servicer will have the right at its option to exercise a “clean-up call” to purchase the receivables and the other issuing entity property (other than the reserve account) from the issuing entity on any payment date if the following conditions are satisfied: (a) as of the last day of the related collection period, the pool balance has declined to 10% or less of the pool balance as of the cut-off date and (b) the purchase price (as defined below) and the available funds for such payment date would be sufficient to pay (i) the servicing fee for such payment date and all unpaid servicing fees for prior periods, (ii) all fees, expenses and indemnities owed to the indenture trustee and the owner trustee and not previously paid by the servicer, (iii) interest then due on the notes and (iv) the aggregate unpaid note balance of all of the outstanding notes. We use the term “pool balance” to mean, as of any date, the aggregate outstanding principal balance of all receivables (other than defaulted receivables) owned by the issuing entity on such date. If the servicer purchases the receivables and other issuing entity property (other than the reserve account), the purchase price will equal the greater of (a) the unpaid principal balance of all the notes, plus accrued and unpaid interest on the notes at the applicable interest rate up to but excluding that payment date (after giving effect to all distributions to be made on that payment date) and (b) the fair market value of the receivables and the other issuing entity property (other than the reserve account). It is expected that at the time this option becomes available to the servicer, only the Class D notes and the Class E notes will be outstanding.

 

 



 

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Additionally, each of the notes is subject to redemption in whole, but not in part, on any payment date on which the sum of the amounts in the reserve account and remaining available funds after the payments under clauses first through twelfth set forth in “—Priority of Payments” below would be sufficient to pay in full the aggregate unpaid note balance of all of the outstanding notes as determined by the servicer. On such payment date, the outstanding notes shall be redeemed in whole, but not in part.

Notice of redemption under the indenture must be given by the indenture trustee not later than 5 days prior to the applicable redemption date to each holder of notes. All notices of redemption will state: (i) the redemption date; (ii) the redemption price; (iii) that the record date otherwise applicable to that redemption date is not applicable and that payments will be made only upon presentation and surrender of those notes and the place where those notes are to be surrendered for payment of the redemption price; (iv) that interest on the notes will cease to accrue on the redemption date; and (v) the CUSIP numbers (if applicable) for the notes.

EVENTS OF DEFAULT

The occurrence of any one of the following events will be an “event of default under the indenture:

 

    a default in the payment of any interest on any note of the Controlling Class when the same becomes due and payable, and such default continues for a period of five business days or more;

 

    a default in the payment of the principal of any note at the related final scheduled payment date or the redemption date;

 

    any failure by the issuing entity to duly observe or perform in any respect any of its covenants or agreements in the indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere specifically dealt with), which failure materially and adversely affects the rights of the noteholders, and which continues unremedied for 60 days (or such longer period not in excess of 90 days as may be reasonably necessary to remedy that failure; provided that that failure is capable of remedy within 90 days) after receipt by the issuing entity of written notice thereof from the indenture trustee or noteholders
   

evidencing at least 25% of the Note Balance of the outstanding notes;

 

    any representation or warranty of the issuing entity made in the indenture proves to be incorrect in any respect when made, which failure materially and adversely affects the rights of the noteholders, and which failure continues unremedied for 60 days (or such longer period not in excess of 90 days as may be reasonably necessary to remedy that failure; provided that that failure is capable of remedy within 90 days) after receipt by the issuing entity of written notice thereof from the indenture trustee or noteholders evidencing at least 25% of the Note Balance of the outstanding notes; and

 

    the occurrence of certain events (which, if involuntary, remain unstayed for more than 90 days) of bankruptcy, insolvency, receivership or liquidation of the issuing entity.

Notwithstanding the foregoing, if a delay in or failure of performance referred to under the first four bullet points above was caused by force majeure or other similar occurrence, then the grace periods described in those bullet points will be extended by an additional 60 calendar days.

The amount of principal required to be paid to noteholders under the indenture generally will be limited to amounts available to make such payments in accordance with the priority of payments. Thus, the failure to pay principal on a class of notes due to a lack of amounts available to make such payments will not result in the occurrence of an event of default until the final scheduled payment date or redemption date for that class of notes.

ISSUING ENTITY PROPERTY

The primary assets of the issuing entity will be a pool of motor vehicle retail installment sale contracts and/or installment loans secured by new and used automobiles, light-duty trucks and vans. We refer to these contracts and loans as “receivables,” to the pool of those receivables as the “receivables pool” and to the persons who financed their purchases or refinanced existing obligations with these contracts and loans as “obligors.”

Substantially all of the receivables were underwritten in accordance with the originator’s underwriting criteria for “sub-prime” receivables. The receivables identified on the schedule of receivables delivered by SC on the closing date will be transferred to the

 

 



 

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depositor by SC and then transferred by the depositor to the issuing entity. The issuing entity will grant a security interest in the receivables and the other issuing entity property to the indenture trustee on behalf of the noteholders.

The “issuing entity property” will include the following:

 

    the receivables, including collections on the receivables received after January 31, 2017, which we refer to as the “cut-off date”;

 

    security interests in the vehicles financed by the receivables, which we refer to as the “financed vehicles”;

 

    all receivable files relating to the original motor vehicle retail installment sale contracts and/or installment loans evidencing the receivables;

 

    rights to proceeds under insurance policies that cover the obligors under the receivables or the financed vehicles;

 

    any other property securing the receivables;

 

    rights to amounts on deposit in the reserve account and the collection account and any other accounts established pursuant to the indenture or sale and servicing agreement (other than the certificate distribution account) and permitted investments of those accounts;

 

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

 

    the proceeds of any and all of the above.

Receivable Representations and Warranties

SC will make certain representations and warranties regarding the characteristics of the receivables as of the cut-off date. Breach of these representations may, subject to certain conditions, result in SC being obligated to repurchase the related receivable. See “The Transfer Agreements and the Administration AgreementRepresentations and Warranties.” This repurchase obligation will constitute the sole remedy available to the noteholders or the issuing entity for any uncured breach by SC of those representations and warranties.

If the depositor, the issuing entity, the owner trustee (in its discretion or at the direction of the certificateholder) or the indenture trustee (in its discretion or at the direction of a noteholder) requests that the sponsor repurchase any receivable due to a breach of a representation or warranty as described above, and the repurchase request has not been fulfilled or otherwise resolved to the reasonable satisfaction of the requesting party within 180 days of the receipt of notice of the request by the sponsor, the requesting party will have the right to refer the matter, at its discretion, to either mediation or third-party arbitration. The terms of the mediation or arbitration, as applicable, are described under “The Transfer Agreements and the Administration Agreement—Requests to Repurchase and Dispute Resolution” in this prospectus.

Review of Asset Representations

As more fully described in “The Transfer Agreements and the Administration Agreement—Asset Representations Review” in this prospectus, if the aggregate amount of delinquent receivables exceeds a specified threshold, then investors holding at least 5% of the aggregate outstanding principal amount of the notes may elect to initiate a vote to determine whether the asset representations reviewer will conduct a review. If investors representing at least a majority of the voting investors vote in favor of directing a review, then the asset representations reviewer will perform a review of specified delinquent receivables for compliance with the representations and warranties made by SC. See “The Transfer Agreements and the Administration Agreement—Asset Representations Review” in this prospectus.

STATISTICAL INFORMATION

The statistical information in this prospectus is based on the pool of receivables as of the cut-off date.

Substantially all of the receivables are the obligations of obligors with credit histories that are below prime or otherwise considered “sub-prime.”

As of the close of business on the cut-off date, the receivables in the pool had an aggregate initial principal balance of $1,224,015,127.29 and had:

 

    a weighted average contract rate of approximately 15.60%;

 

    a weighted average original term of approximately 71 months;
 

 



 

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    a weighted average remaining term of approximately 64 months;

 

    a weighted average loan-to-value ratio of approximately 109.15%;

 

    a weighted average loss forecasting score of approximately 552;

 

    a minimum non-zero FICO® score at origination of 385;

 

    a maximum non-zero FICO® score at origination of 900; and

 

    a non-zero weighted average FICO® score at origination of approximately 609.

For more information about the characteristics of the receivables in the pool, see “The Receivables Pool” in this prospectus. In connection with the offering of the notes, the depositor has performed a review of the receivables in the pool and certain disclosure in this prospectus relating to the receivables, as described under “The Receivables Pool—Review of Pool Assets” in this prospectus.

As described under “The Receivables Pool” in this prospectus, receivables originated under SC’s underwriting guidelines are approved based on either (i) a system-driven origination process defined by SC’s standard credit policy or (ii) the authority of a credit underwriter. A receivable may be originated outside of SC’s standard credit policy based on certain credit and asset related criteria, including (i) loan-to-value ratio; (ii) affordability measures, such as loan-to-income ratio, payment-to-income ratio, debt-to-income ratio, minimum income and maximum payment amount; (iii) amount of cash down payment and/or trade equity; (iv) collateral type and quality, such as vehicle age and mileage; and (v) the length and depth of credit history. SC’s centralized credit and originations department monitors all applications and actively manages the rate of approval of applications to defined tolerances and limits.

None of the receivables in the pool was originated with exceptions to SC’s underwriting guidelines. See “The Receivables Pool—Exceptions to Underwriting Criteria” in this prospectus.

In addition to the purchase of receivables from the issuing entity in connection with the servicer’s exercise of its “clean-up call” option as described

above under “Interest and Principal—Optional Redemption of the Notes,” receivables may be purchased from the issuing entity by the sponsor, in connection with the breach of certain representations and warranties concerning the characteristics of the receivables, and by the servicer, in connection with the breach of certain servicing covenants, as described under “The Transfer Agreements and the Administration Agreement—Collection, Extensions and Modifications of Receivables” in this prospectus.

PRIORITY OF PAYMENTS

Prior to the acceleration of the notes following an event of default, on each payment date, the indenture trustee will make the following payments and deposits from Available Funds in the collection account (including funds, if any, deposited into the collection account from the reserve account to the extent described in “The Transfer Agreements and the Administration Agreement—Reserve Account”) in the following amounts and order of priority:

 

    first, to the indenture trustee, the owner trustee and the asset representations reviewer, fees, any reasonable expenses and any indemnification amounts not previously paid by the servicer (in the case of such amounts owing to the indenture trustee or the owner trustee) or the sponsor (in the case of such amounts owing to the asset representations reviewer); provided, that such fees, expenses and indemnification amounts may not exceed, in the aggregate, $300,000 per annum;

 

    second, to the servicer, the servicing fee (including servicing fees not previously paid);

 

    third, to the Class A noteholders, interest on the Class A notes, pro rata;

 

    fourth, to the noteholders, the First Allocation of Principal;

 

    fifth, to the Class B noteholders, interest on the Class B notes;

 

    sixth, to the noteholders, the Second Allocation of Principal;

 

    seventh, to the Class C noteholders, interest on the Class C notes;

 

    eighth, to the noteholders, the Third Allocation of Principal;
 

 



 

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    ninth, to the Class D noteholders, interest on the Class D notes;

 

    tenth, to the noteholders, the Fourth Allocation of Principal;

 

    eleventh, to the Class E noteholders, interest on the Class E notes;

 

    twelfth, to the noteholders, the Fifth Allocation of Principal;

 

    thirteenth, to the reserve account, an amount required to cause the amount of cash on deposit in the reserve account to equal the Specified Reserve Account Balance;

 

    fourteenth, to the noteholders, the Regular Allocation of Principal; and

 

    fifteenth, any funds remaining, to the certificateholders, pro rata based on the percentage interest of each certificateholder, or, to the extent definitive certificates have been issued, to the certificate distribution account for distribution to the certificateholders.

The First Allocation of Principal, Second Allocation of Principal, Third Allocation of Principal, Fourth Allocation of Principal, Fifth Allocation of Principal and Regular Allocation of Principal will be paid to the holders of the notes as described under “The Notes—Payments of Principal” in this prospectus.

CREDIT ENHANCEMENT

Credit enhancement provides protection for the notes against losses and delays in payment on the receivables or other shortfalls of cash flow. The credit enhancement for the notes will be the reserve account, overcollateralization, the excess interest on the receivables and, in the case of the Class A notes, the Class B notes, the Class C notes and the Class D notes, subordination of certain payments as described below. If the credit enhancement is not sufficient to cover all amounts payable on the notes, notes having a later final scheduled payment date generally will bear a greater risk of loss than notes having an earlier final scheduled payment date. See also “The Transfer Agreements and the Administration Agreement—Overcollateralization” and “Excess Interest in this prospectus.

The credit enhancement for the notes will be as follows:

Class A

notes:

   Subordination of payments on the Class B notes, the Class C notes, the Class D notes and the Class E notes, overcollateralization, the reserve account and excess interest on the receivables.
Class B notes:    Subordination of payments on the Class C notes, the Class D notes and the Class E notes, overcollateralization, the reserve account and excess interest on the receivables.
Class C notes:    Subordination of payments on the Class D notes and the Class E notes, overcollateralization, the reserve account and excess interest on the receivables.
Class D notes:    Subordination of payments on the Class E notes, overcollateralization, the reserve account and excess interest on the receivables.
Class E notes:    Overcollateralization, the reserve account and excess interest on the receivables.

Subordination of Payments on the Class B Notes

As long as the Class A notes remain outstanding, payments of interest on any payment date on the Class B notes will be subordinated to payments of interest on the Class A notes and certain other payments on that payment date (including principal payments of the Class A notes in specified circumstances), and payments of principal of the Class B notes will be subordinated to all payments of principal of and interest on the Class A notes and certain other payments on that payment date. If the notes have been accelerated after an event of default under the indenture, the priority of these payments will change. For a description of these changes in priority, see “Interest and Principal—Payment of Principal and Interest after an Event of Default” above and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration.”

Subordination of Payments on the Class C Notes

As long as the Class A notes and the Class B notes remain outstanding, payments of interest on any payment date on the Class C notes will be subordinated to payments of interest on the Class A notes and the Class B notes and certain other payments on that payment date (including principal payments of the Class A notes and the Class B notes in specified circumstances), and payments of

 

 



 

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principal of the Class C notes will be subordinated to all payments of principal of and interest on the Class A notes and the Class B notes and certain other payments on that payment date. If the notes have been accelerated after an event of default under the indenture, the priority of these payments will change. For a description of these changes in priority, see “Interest and Principal—Payment of Principal and Interest after an Event of Default” above and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration.”

Subordination of Payments on the Class D Notes

As long as the Class A notes, the Class B notes and the Class C notes remain outstanding, payments of interest on any payment date on the Class D notes will be subordinated to payments of interest on the Class A notes, the Class B notes and the Class C notes and certain other payments on that payment date (including principal payments of the Class A notes, the Class B notes and the Class C notes in specified circumstances), and payments of principal of the Class D notes will be subordinated to all payments of principal of and interest on the Class A notes, the Class B notes and the Class C notes and certain other payments on that payment date. If the notes have been accelerated after an event of default under the indenture, the priority of these payments will change. For a description of these changes in priority, see “Interest and Principal—Payment of Principal and Interest after an Event of Default” above and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration.”

Subordination of Payments on the Class E Notes

As long as the Class A notes, the Class B notes, the Class C notes and the Class D notes remain outstanding, payments of interest on any payment date on the Class E notes will be subordinated to payments of interest on the Class A notes, the Class B notes, the Class C notes and the Class D notes and certain other payments on that payment date (including principal payments of the Class A notes, the Class B notes, the Class C notes and the Class D notes in specified circumstances), and payments of principal of the Class E notes will be subordinated to all payments of principal of and interest on the Class A notes, the Class B notes, the Class C notes and the Class D notes and certain other payments on that payment date. If the notes have been accelerated after an event of default under the indenture, the priority of these payments will change. For a description of these changes in priority, see “Interest

and Principal—Payment of Principal and Interest after an Event of Default” above and “The Indenture—Priority of Payments Will Change Upon Events of Default that Result in Acceleration.”

Overcollateralization

Overcollateralization is the amount by which the pool balance exceeds the outstanding principal balance of the notes. The initial overcollateralization level on the closing date will be approximately 12.00% of the pool balance as of the cut-off date and is expected to build to a target overcollateralization level on each payment date equal to the greater of (a) the sum of 16.00% of the pool balance as of the last day of the related collection period and 1.00% of the pool balance as of the cut-off date and (b) 1.50% of the pool balance as of the cut-off date.

After the occurrence of a Cumulative Net Loss Trigger with respect to the receivables (and regardless of whether the Cumulative Net Loss Ratio for any subsequent Measurement Date does not exceed the level specified as the “Trigger” in the Cumulative Net Loss Rate table for that subsequent Measurement Date), the target overcollateralization amount on each payment date will increase to the greater of (a) the sum of 25.00% of the pool balance as of the last day of the related collection period and 1.00% of the pool balance as of the cut-off date and (b) 1.50% of the pool balance as of the cut-off date. See “The Transfer Agreements and the Administration Agreement—Overcollateralization” in this prospectus.

Reserve Account

On the closing date, the reserve account will initially be funded by a deposit of proceeds from the sale of the notes in an amount not less than 1.00% of the pool balance as of the cut-off date.

On each payment date, after giving effect to any withdrawals from the reserve account, if the amount of cash on deposit in the reserve account is less than the specified reserve account balance, the deficiency will be funded by the deposit of available funds to the reserve account in accordance with the priority of payments described above. The “specified reserve account balance” will be, on any payment date, an amount equal to 1.00% of the pool balance as of the cut-off date.

On each payment date, the indenture trustee will withdraw funds from the reserve account to cover any shortfalls in the amounts required to be paid on

 

 

 



 

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that payment date with respect to clauses first through twelfth of the priority of payments described above.

On each payment date, after giving effect to any withdrawals from the reserve account on such payment date, any amounts of cash on deposit in the reserve account in excess of the specified reserve account balance for that payment date will constitute available funds and will be distributed in accordance with the priority of payments. See “The Transfer Agreements and the Administration Agreement—Reserve Account.”

Excess Interest

Because more interest is expected to be paid by the obligors in respect of the receivables than is necessary to pay the servicing fee, trustee fees, expenses and indemnity amounts (to the extent not otherwise paid by the servicer), asset representations reviewer fees and expenses (to the extent not otherwise paid by the sponsor), amounts required to be deposited in the reserve account, if any, and interest on the notes each month, there is expected to be “excess interest.” Any excess interest will be applied on each payment date as an additional source of available funds for distribution in accordance with “Priority of Payments” above.

TAX STATUS

On the closing date, Mayer Brown LLP, special federal tax counsel to the depositor, will deliver its opinion, subject to the assumptions and qualifications therein, to the effect that, for United States federal income tax purposes, the issuing entity will not be classified as an association or a publicly traded partnership taxable as a corporation, and the offered notes (other than notes, if any, owned by: (i) the issuing entity or a person considered to be the same person as the issuing entity for United States federal income tax purposes, (ii) a member of an expanded group (as defined in Treasury Regulation section 1.385-1(c)(4) or any successor regulation then in effect) that includes the issuing entity (or a person considered to be the same person as the issuing entity for United States federal income tax purposes), (iii) a “controlled partnership” (as defined in Treasury Regulation Section 1.385-1(c)(1)) of such expanded group or (iv) a disregarded entity owned directly or indirectly by a person described in preceding clause (ii) or (iii)) will be treated as debt for United States federal income tax purposes.

Each holder of a note, by acceptance of a note, will agree to treat the note as indebtedness for federal, state and local income and franchise tax purposes.

We encourage you to consult your own tax advisor regarding the United States federal income tax consequences of the purchase, ownership and disposition of the notes and the tax consequences arising under the laws of any state or other taxing jurisdiction.

See “Material Federal Income Tax Consequences” in this prospectus.

CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. BENEFIT PLANS

Subject to the considerations described in “Certain Considerations for ERISA and Other U.S. Benefit Plans” in this prospectus, the offered notes may be purchased by employee benefit plans and other retirement accounts. An employee benefit plan, any other retirement plan and any entity deemed to hold “plan assets” of any employee benefit plan or other plan should consult with its counsel before purchasing the offered notes.

See “Certain Considerations for ERISA and Other U.S. Benefit Plans” in this prospectus.

MONEY MARKET INVESTMENT

The Class A-1 notes will be structured to be “eligible securities” for purchase by money market funds as defined in paragraph (a)(12) of Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Rule 2a-7 includes additional criteria for investments by money market funds, including requirements and clarifications relating to portfolio credit risk analysis, maturity, liquidity and risk diversification. If you are a money market fund contemplating a purchase of Class  A-1 notes, you or your advisor should consider these requirements before making a purchase.

CREDIT RISK RETENTION

Pursuant to the SEC’s credit risk retention rules, 17 C.F.R. Part 246 (“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 (which for EU risk retention purposes will be a wholly-owned special purpose

 

 



 

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subsidiary of SC) of an “eligible vertical interest” of at least 5% of each class of notes and certificates issued by the issuing entity.

The depositor or another majority-owned affiliate of SC (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) will retain 5% of the initial Note Balance of each class of notes (including the Class E notes) and 5% of the aggregate Percentage Interests in the certificates to satisfy the obligations of SC under Regulation RR, though SC or one or more of its affiliates may retain more than 5% of one or more classes of notes or of the certificates. The material terms of the notes are described in this prospectus under “The Notes,” and the material terms of the certificates are described in this prospectus under “The Certificates” above.

SC does not intend to transfer or hedge the portion of its retained economic interest that is intended to satisfy the requirements of Regulation RR except as permitted under Regulation RR.

See “Credit Risk Retention” in this prospectus.

EU RISK RETENTION

SC, as “originator,” will agree to retain a material net economic interest of not less than 5% in the securitization transaction described in this prospectus, in the form of retention of at least 5% of the nominal value of each of the tranches sold or transferred to investors in accordance with the text of option (a) of each of Article 405(1) of the EU CRR, Article 51(1) of the AIFM Regulation and Article 254(2) of the Solvency II Regulation, by holding all the membership interest in the depositor (or one or more other wholly-owned special purpose subsidiaries of SC), which in turn will retain at least 5% of the nominal value of each class of the notes (including the Class E notes) and at least 5% of the aggregate Percentage Interests in the certificates. Each prospective investor is required to independently assess and determine the sufficiency of the information described above and in this prospectus generally for the purposes of complying with the EU credit risk retention rules referred to above and any corresponding national measures which may be relevant and none of SC, the depositor, the issuing entity, the underwriters, their respective affiliates nor any other party to the transactions described in this prospectus makes any representation that the information described above or in this

prospectus is sufficient in all circumstances for such purposes. See “The Sponsor – EU Risk Retention” and “Legal Investment – Requirements for Certain European Regulated Investors and Affiliates” in this prospectus.

CERTAIN VOLCKER RULE CONSIDERATIONS

The issuing entity will rely on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. 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).

RATINGS

The depositor expects that the notes will receive credit ratings from two credit rating agencies hired by the sponsor to rate the notes (the “Hired Agencies”).

Although the Hired Agencies are not contractually obligated to monitor the ratings on the notes, we believe that the Hired Agencies will continue to monitor the transaction while the notes are outstanding. The Hired Agencies’ ratings on the notes may be lowered, qualified or withdrawn at any time. In addition, a rating agency not hired by the sponsor to rate the transaction may provide an unsolicited rating that differs from (or is lower than) the ratings provided by the Hired Agencies. A rating is based on each rating agency’s independent evaluation of the receivables and the availability of any credit enhancement for the notes. A rating, or a change or withdrawal of a rating, by one rating agency will not necessarily correspond to a rating, or a change or a withdrawal of a rating, from any other rating agency. See “Risk Factors—The ratings of the notes may be withdrawn or lowered, or the notes may receive an unsolicited rating, which may have an adverse effect on the liquidity or the market price of the notes” in this prospectus.

REGISTRATION UNDER THE SECURITIES ACT

The depositor has filed a registration statement relating to the notes with the SEC on Form SF-3. The depositor has met the registrant requirements contained in General Instruction I.A.1 to Form SF-3.

 

 



 

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CONFLICTS OF INTEREST

Our affiliate, Santander Investment Securities Inc., is participating in this offering as an underwriter of the Class A notes. Accordingly, this offering is being conducted in compliance with the provisions of FINRA Rule 5121. Santander Investment Securities Inc. is not permitted to sell the notes in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the customer to which the account relates.

 

 



 

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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 notes may not be a suitable investment for you.   

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 notes are complex investments that should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, default and market risks, the tax consequences of an investment in the notes and the interaction of these factors.

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 by solely 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. We cannot assure you that these amounts, together with other payments and collections in respect of the receivables, will 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 in payments due to you and you could suffer a loss.
Repurchase obligations are limited.    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 from the issuing entity a receivable for a breach of 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). The sponsor will represent that, among other things, each receivable is secured by a financed vehicle and that each receivable has been originated or acquired by the sponsor in accordance with the sponsor’s customary origination practices. Additionally, the issuing entity, the depositor and the sponsor will make representations and warranties with respect to the perfection and priority of the security interests in the financed vehicles other than any statutory liens arising on or after the closing date which may have priority even over perfected security interests in the financed vehicles. 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. 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 is obligated to repurchase any receivable if there is a breach of any of its representations and warranties or covenants regarding the eligibility of such receivable (but

 

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   only if such breach is not cured and materially and adversely affects the interest of the issuing entity or the noteholders in such receivable), there can be no assurance given that each representation and warranty was true when made or that the sponsor will fulfill its obligation to repurchase or will be financially in a position to fund its repurchase obligation.
A receivables pool that includes substantially all receivables that are the obligations of sub-prime obligors will have higher default rates than 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 “Material Legal Aspects of the Receivables” in this prospectus.
Credit scores, loss forecasting scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables.        Information regarding credit scores for the obligors with regard to the receivables in the pool obtained at the time of acquisition from the originating dealer of their contracts is presented in “The Receivables Pool” in this prospectus. 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 in payment than a borrower with a lower score. In addition, information regarding the scores generated by SC’s proprietary loss forecasting scoring model for the receivables in the pool is also presented in “The Receivables Pool” in this prospectus. As discussed in “The Originator—Credit Risk Management—Credit Scoring and Loss Forecasting,” the sponsor developed its scoring model to try to assess the probability that a receivable will default based on the sponsor’s proprietary methods. However, neither the sponsor nor any other party makes any representations or warranties as to any obligor’s current credit score or the current loss forecasting score or actual performance of any motor vehicle receivable or that a particular credit score or loss forecasting score should be relied upon as a basis for an expectation that a receivable will be paid in accordance with its terms.
   Additionally, 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 likely to differ in the future. Therefore, there can be no assurance that the net loss experience calculated and presented in this prospectus with respect to the sponsor’s managed portfolio of contracts will reflect actual experience with respect to the receivables in the receivables pool. Recently the sponsor has experienced higher delinquencies and repossessions on its auto loan portfolio, which experience may continue. Additionally, in recent months the prices of used vehicles, including the prices at which the servicer has sold repossessed vehicles, have declined and resulted in increased credit losses on defaulted receivables, which may continue. There can be no assurance that the future delinquency rates, rates of repossession,

 

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   recovery rates on repossessed vehicles or loss experience of the servicer with respect to the receivables will be better or worse than that set forth in the static pool information and historical delinquency and loss information contained in this prospectus.
   Further, the servicer recently made certain changes to its delinquency policy with respect to receivables originated or acquired by SC on or after January 1, 2017. The servicer considers a receivable delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date, as determined in accordance with SC’s customary servicing practices. With respect to receivables originated by SC prior to January 1, 2017 and through its “Chrysler Capital” channel, the required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by SC or acquired by SC from an unaffiliated third-party originator prior to January 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by SC or acquired by SC from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel the receivable was originated through. In each case, the period of delinquency is based on the number of days payments are contractually past due. Although we do not expect the change in the delinquency policy to have an impact on net loss experience, there can be no assurance that such change will not result in increased delinquencies on the receivables or impact the number of extensions granted on receivables. As a result there can be no assurance that the delinquency and credit loss experience presented in this prospectus with respect to the sponsor’s managed portfolio of contracts or the static pool information will reflect actual experience with respect to the receivables in the receivables pool.
The rate of depreciation of certain financed vehicles could exceed the amortization of the outstanding principal amount of the related receivables, which may result in losses.        There can be no assurance that the value of any financed vehicle will be greater than 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 new. As a result, it is highly likely that the principal balance of a receivable will exceed the value of the related financed vehicle during the early years of a receivable’s term. The lack of any significant equity in their vehicles may make it more likely that those obligors will default in their payment obligations if their personal financial conditions change. Defaults during these earlier years are 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 the related 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. See “The Receivables Pool—Pool Stratifications” in this prospectus for the percentage of contracts with original terms greater than 72 months. Additionally, 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 with a higher loan-to-value ratio and with respect to receivables secured by new vehicles because of the higher rate of depreciation described

 

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   above and the decline in used vehicle prices. 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 or the termination of dealer franchises by a manufacturer.
   The pricing of used vehicles is affected by the supply and demand for those vehicles, which, in turn, is affected by consumer tastes, economic factors (including the price of gasoline), 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. 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. Further, the insolvency 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. In any of the foregoing cases, the delinquency, repossession and credit loss figures, shown in the tables appearing under “The Receivables PoolDelinquencies, 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 than would otherwise be the case.
You may experience reduced returns and delays on your notes resulting from a vehicle recall.    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. 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. If the default rate on the receivables increases and the price at which the related vehicles may be sold declines or if a recall delays the timing of sales, you may experience losses with respect to your notes. If any of these events materially affect collections on the receivables, you may experience delays in payments 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.        The concentration of the receivables in specific geographic areas may increase the risk of loss. A deterioration in economic conditions 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 affect the delinquency, default, loss and repossession experience of the issuing entity with respect to the receivables of the obligors in such states. See “— The return on your notes may be reduced due to varying economic circumstances and/or an economic downturn.” 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. No prediction can be made and no assurance can be given as to the effect of an economic downturn or economic growth on the rate of delinquencies, prepayments and/or losses on the receivables. See “—Returns on your investments may be reduced by prepayments on the

 

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   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 17.01%, 13.39%, 8.70% and 5.99% of the principal balance of the receivables in the pool were located in Texas, Florida, California and Georgia, 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. The effect of economic factors, as described under “— The return on your notes may be reduced due to varying economic circumstances and/or an economic downturn” and the effect of natural disasters, such as hurricanes and floods, on the performance of the receivables is unclear, but there may be a significant adverse effect on general economic conditions, consumer confidence and general market liquidity. Because of the concentration of the obligors in certain states, any adverse economic factors or natural disasters in those states may have a greater effect on the performance of the notes than if the concentration did not exist.
The return on your notes may be reduced due to varying economic circumstances and/or an economic downturn.    A deterioration in economic conditions and certain economic factors, such as unemployment, interest rates, the price of gasoline, high energy prices, the rate of inflation and consumer perceptions of the economy, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables. The economic conditions could deteriorate in connection with an economic recession or could be due to events such as rising oil prices, housing price declines, terrorist events, extreme weather conditions or an increase of an obligor’s payment obligations under other indebtedness incurred by the obligor. 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.
   In addition, a general economic downturn may adversely affect the performance of the receivables. During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. High unemployment and a general reduction in the availability of credit may lead to increased delinquencies and defaults by obligors. Further, these periods may also be accompanied by decreased consumer demand for light-duty trucks, SUVs or other vehicles and declining values of automobiles securing outstanding automobile loan contracts, which weakens collateral coverage and increases the amount of a loss in the event of default by an obligor. Significant increases in the inventory of used automobiles 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.
   No prediction or assurance can be made as to the effect of an economic downturn or economic growth on the rate of delinquencies, prepayments and/or losses on the receivables.

 

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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 than you expected for various reasons, including the reasons set forth below. You may not be able to invest the amounts paid to you earlier than you expected at a rate of return that is equal to or greater than the rate of return on your notes.

 

•    The rate of return of principal is uncertain. The amount of distributions of principal of your notes and the time when you receive those distributions depend 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 or defaults of the receivables. For example, the servicer may engage in marketing practices or promotions, including refinancing, which may indirectly result in faster than expected payments on 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, payment of principal on the notes will be accelerated.

 

•    You may be unable to reinvest distributions in comparable investments. 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. Asset backed securities, like the notes, usually produce a faster return of principal to investors if market interest rates fall below the interest rates on the receivables and produce a slower return of principal when market interest rates are above the interest rates on the receivables. As a result, you are likely to receive more money to reinvest at a time when other investments generally are producing a lower yield than that on your notes, and are likely to receive less money to reinvest when other investments generally are producing a higher yield than that on your notes. You will bear the risk that the timing and amount of distributions on your notes will prevent you from attaining your desired yield.

 

•    An optional redemption of the notes will shorten the life of your investment which may reduce your yield to maturity. 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. 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.

 

  
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;

 

•    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

 

•    your notes may be repaid earlier than scheduled, which will involve the prepayment risks described under “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 balance of notes to be paid before the related final scheduled payment date will involve the prepayment risks described above.
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. For example, upon the occurrence of an event of default relating to a payment default or certain events of bankruptcy, insolvency, receivership or liquidation with respect to the issuing entity, the holders of 66 2/3% of the Note Balance of the Controlling Class may consent to the sale of the receivables even if the proceeds from such a sale would not be sufficient to pay in full the principal of and accrued interest on all outstanding classes of notes. See “The Indenture—Rights Upon Event of Default” in this prospectus. Because the holders of different classes of notes may have varying interests 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.    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, Class C notes, Class D notes and Class E 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 failure to make principal payments on any notes will generally not result in an event of default under the indenture until the applicable final scheduled payment date.        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 those purposes. 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.

 

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Your share of possible losses may not be proportional.    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. As a result, a class of notes with a later maturity date may absorb more losses than a class of notes with an earlier maturity date.
Because the Class B notes, the Class C notes, the Class D notes and the Class E notes are subordinated to the Class A notes, payments on those classes are more sensitive to losses on the receivables.        Certain classes of notes are subordinated to other classes of notes, and any classes of notes having a later final scheduled payment date are 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. See “Your share of possible losses may not be proportional” above.
   If the notes are accelerated following an event of default under the indenture (as a result of a payment default or a bankruptcy event relating to the issuing entity), interest on the Class A notes will be paid ratably and principal payments will be made first to the Class A-1 noteholders until the Class A-1 notes are paid in full. Next, the noteholders of the Class A-2 notes and the Class A-3 notes will receive principal payments ratably until each such class is paid in full. After interest on and principal of all of the Class A notes are paid in full, interest and principal payments will be made to the Class B noteholders. After interest on and principal of all of the Class B notes are paid in full, interest and principal payments will be made to the Class C noteholders. After interest on and principal of all of the Class C notes are paid in full, interest and principal payments will be made to the Class D noteholders. After interest on and principal of all of the Class D notes are paid in full, interest and principal payments will be made to the Class E noteholders. If the notes are accelerated following an event of default under the indenture as a result of the issuing entity’s breach of a representation, warranty or covenant (other than a payment default), interest on the Class A notes will be paid ratably followed by interest on the Class B notes, then interest on the Class C notes, then interest on the Class D notes and then interest on the Class E notes. Principal payments will then be made first to the Class A-1 noteholders until the Class A-1 notes are paid in full. Next, principal will be paid ratably to the Class A-2 notes and the Class A-3 notes until each such class is paid in full. Next, the Class B notes will receive principal payments until the Class B notes are paid in full. Next, the Class C notes will receive principal payments until the Class C notes are paid in full. Next, the Class D notes will receive principal payments until the Class D notes are paid in full. Next, the Class E notes will receive principal payments until the Class E notes are paid in full. Therefore, 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.
Retention of some or all of one or more classes of notes by the depositor or an affiliate of the depositor may reduce the liquidity of the notes.        5% of the initial Note Balance of each class of notes (including the Class E notes) will be retained by the depositor or one or more other majority-owned affiliates of SC (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) to satisfy the credit risk retention obligations of SC described under “Credit Risk Retention” and “EU Risk Retention” in this prospectus, and the depositor or another affiliate of SC may retain additional portions of

 

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   any class of notes. The market for 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. Additionally, if any retained notes are subsequently sold in the secondary market, the voting power of the noteholders of the outstanding notes may be diluted.
The issuing entity’s security interest in the financed vehicles will not be noted on the certificates of title, which may cause losses on your notes.    Upon the origination of a receivable, the originator or its predecessor in interest or affiliate, as applicable, takes a security interest in the financed vehicle by placing a lien on the title to the financed vehicle. In connection with the sale of receivables to the depositor, the originator will assign its security interests in the financed vehicles to the depositor, who will further assign them to the issuing entity. Finally, the issuing entity will pledge its interest in the financed vehicles as collateral for the notes. The lien certificates or certificates of title relating to the financed vehicles 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. The sponsor or another entity may be obligated to repurchase any receivable sold to the issuing entity which did not have a perfected security interest in the name of the originator or an affiliate, as applicable, in the financed vehicle. The servicer, the originator or the sponsor may be required to purchase or repurchase, as applicable, any receivable sold to the issuing entity as to which it failed to obtain or maintain a perfected security interest in the financed vehicle securing the receivable. All of these purchases and repurchases are limited to breaches that materially and adversely affect the interests of the issuing entity or the noteholders in the related receivable and are subject to the expiration of a cure period. 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. If the issuing entity elects to attempt to repossess the related financed vehicle, it might not be able to realize any liquidation proceeds on the financed vehicle and, as a result, you may suffer a loss on your investment in the notes.
Interests of other persons in the receivables and financed vehicles could be superior to the issuing entity’s interest, which may result in reduced payments on your notes.    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 these liens result in the loss of the priority of the security interest in the financed vehicle after the issuance of notes by the issuing entity. Generally, no action will be taken to perfect the rights of the issuing entity in proceeds of any insurance policies covering individual financed vehicles or obligors. Therefore, the rights of a third party with an interest in the proceeds could prevail against the rights of the issuing entity prior to the time the proceeds are deposited by the servicer into an account controlled by the trustee for the notes. See “Material Legal Aspects of the Receivables—Security Interests in the Financed Vehicles” in this prospectus.

 

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The issuing entity’s interest in the receivables could be defeated because the contracts will not be delivered to the issuing entity.    The servicer, in its capacity as custodian, will maintain possession of the original contracts for each of the receivables, and the original contracts will not be segregated or marked as belonging to the issuing entity. If the servicer sells or pledges and delivers the original contracts for the receivables to another party, in violation of its contractual obligations, this party could acquire an interest in the receivables which may have priority over the issuing entity’s interest.
   In addition, another person could acquire an interest in a receivable that is superior to the issuing entity’s interest in the receivable if the receivable is evidenced by an electronic contract and the servicer loses control over the authoritative copy of the contract and another party purchases the receivable evidenced by the contract without knowledge of the issuing entity’s interest. If the servicer loses control over a contract through fraud, forgery, negligence or error, or as a result of a computer virus or a hacker’s actions or otherwise, a person other than the issuing entity may be able to modify or duplicate the authoritative copy of the contract.
   As a result of any of the above events, the issuing entity may not have a perfected security interest in certain receivables. The possibility that the issuing entity may not have a perfected security interest in the receivables may affect the issuing entity’s ability to repossess and sell the underlying financed vehicles. Therefore, you may be subject to delays in payment and may incur losses on your investment in the notes.
Federal financial 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, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Although the Dodd-Frank Act itself became effective on July 22, 2010, many of its provisions had delayed implementation dates or required implementing regulations to be issued. Some of these regulations still have not been issued. 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, defined as “covered financial companies”, 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 also for the liquidation of certain of their respective subsidiaries, defined as “covered subsidiaries”, in the event such a subsidiary is, among other things, in default or in danger of default and the liquidation of such subsidiary would avoid or mitigate serious adverse effects on the financial stability or economic conditions of the United States;

 

•    created a new framework for the regulation of over-the-counter derivatives activities;

 

•    expanded the regulatory oversight of securities and capital markets activities by the SEC; and

 

•    created 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

 

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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.
   The Dodd-Frank Act also increased the regulation of the securitization markets. For example, it gives broader powers to the SEC to regulate credit rating agencies and adopt regulations governing these organizations and their activities.
   Compliance with the implementing regulations under the Dodd-Frank Act or the oversight of the SEC, CFPB or other government entities, as applicable, may impose costs on, create operational constraints for, or place limits on loan pricing with respect to finance companies such as the sponsor. Many provisions of the Dodd-Frank Act are required to be implemented through rulemaking by the appropriate federal regulatory agencies. Some of these implementing rules still have not been issued. As such, in many respects, 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. In particular, no assurance can be given that these new requirements imposed, or to be imposed after implementing regulations are issued, by the Dodd-Frank Act will not have a significant impact on the servicing of the receivables, and on the regulation and supervision of the servicer, the sponsor, the depositor, the issuing entity and/or their respective affiliates.
   In addition, no assurances can be given that the framework for the liquidation of “covered financial companies” or their “covered subsidiaries” would not apply to the sponsor or its nonbank affiliates, the issuing entity or the depositor, or, if it were to apply, would not 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.
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. 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,

 

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   liable to the obligor for any violation by the lender. Under certain circumstances, the liability of the issuing entity to the obligor for violations of applicable federal and state consumer protection laws may be limited by the applicable law. In some cases, this liability could affect an assignee’s ability to enforce its rights related to secured loans such as the receivables. 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 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 Law” in this prospectus.
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 could adversely affect the ability of the servicer to collect full amounts of interest on a receivable as well as to foreclose on an affected receivable during and, in certain circumstances, after the obligor’s period of active military duty. This legislation 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.
Changes to federal or state bankruptcy or debtor relief laws may impede collection efforts or alter timing and amount of collections, which may result in acceleration of or reduction in payment on your notes.    If an obligor sought protection under federal or state bankruptcy or debtor relief laws, a court could reduce or discharge completely the obligor’s obligations to repay amounts due on its receivable. As a result, that receivable would be written off as uncollectible. You could suffer a loss if no funds are available from credit enhancement or other sources to cover the applicable default amount.
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:
  

•    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;

 

•    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

 

•    the fact that the issuing entity and the indenture trustee may not have a perfected security interest in any cash collections of the

 

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receivables held by the servicer at the time that a bankruptcy proceeding begins.

Adverse events with respect to the servicer or its affiliates could affect the timing of payments on your notes or have other adverse effects on your notes.    Adverse events with respect to the servicer or any of its 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, 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.
   Additionally, the success of your investment depends upon the ability of the servicer to store, retrieve, process and manage substantial amounts of information. If the servicer experiences any interruptions or losses in its information processing capabilities, its business, financial conditions and results of operations and, ultimately, your notes may suffer.
   The sponsor is party to, or is periodically otherwise involved in, reviews, investigations, and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the Federal Reserve, the CFPB, the U.S. Department of Justice (the “DOJ”), the SEC, the Federal Trade Commission (the “FTC”) and various state regulatory agencies. Since July 2014, the sponsor has received civil subpoenas and civil investigative demands from various federal and state agencies, including from the DOJ under the Financial Institutions Reform, Recovery and Enforcement Act, the SEC and several state attorneys general, requesting the production of documents and communications that, among other things, relate to the origination, underwriting and securitization of auto loans for varying time periods since 2007. Investigations, litigation proceedings and/or information-gathering requests that the sponsor or any of its subsidiaries or affiliates are involved in, or may become involved in, may result in 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 its duties under the transaction documents.
   In October 2016, the sponsor’s parent, Santander Consumer USA Holdings Inc. (“SC Holdings”) filed amendments to certain periodic reports previously filed with the SEC after determining that certain of its previously issued audited and unaudited financial statements should no longer be relied on and should be restated due to certain errors identified in such financial statements. See “The Sponsor” in this prospectus for a detailed description of such identified errors. Such errors in previously issued financial statements for the affected periods may result in adverse consequences to the sponsor or any of its subsidiaries or its affiliates, including without limitation, allegations of fraud by SC Holdings’ shareholders relating to the misstatement of certain income statement and balance sheet items, adverse settlements or judgments relating to such errors, or other actions. Such claims and actions, even if unsuccessful, could affect the ability of the sponsor to perform its duties under the transaction documents, could result in delays in payments on your notes or could affect the performance or

 

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   market value of your notes and your ability to sell your notes in the secondary market. If successful, such actions could affect the ability of the sponsor to perform its duties under the transaction documents, result in losses or delays in payments to you and affect the performance or market value of your notes and your ability to sell your notes in the secondary market.
   In addition, because the largest shareholder of the sponsor’s parent, Santander Holdings USA, Inc. (“SHUSA”), is a bank holding company and because the sponsor provides third-party services to banks, the sponsor is subject to certain banking regulations, including oversight by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, and the Bank of Spain. Such banking regulations could limit the activities and the types of businesses that the sponsor may conduct. The Federal Reserve has broad enforcement authority over bank holding companies and their subsidiaries. The Federal Reserve could exercise its power to restrict SHUSA from having a non-bank subsidiary that is engaged in any activity that, in the Federal Reserve’s opinion, is unauthorized or constitutes an unsafe or unsound business practice, and could exercise its power to restrict the sponsor from engaging in any such activity. The Federal Reserve may also impose substantial fines and other penalties for violations that the sponsor may commit. Additionally, the Federal Reserve has the authority to approve or disallow acquisitions that the sponsor may contemplate, which may limit the sponsor’s future growth plans. To the extent that the sponsor is subject to banking regulation, the sponsor could be at a competitive disadvantage because some of its competitors are not subject to these limitations.
   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” above.
Risk of loss or delay in payment may result from delays in the transfer of servicing responsibilities due to the servicing fee structure.    Upon the occurrence of a servicer replacement event, the indenture trustee may or, 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. In addition, the holders of notes evidencing not less than a majority of the outstanding principal amount of the notes of the controlling class have the ability to waive any servicer replacement event.
   In the event of the removal of the servicer and the appointment of a successor servicer, we cannot predict:
  

•    the cost of the transfer of servicing to the successor servicer; or

 

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•    the ability of the successor servicer to perform the obligations and duties of the servicer under the sale and servicing agreement. Furthermore, there is no guarantee that a replacement servicer would 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 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, if servicing responsibilities are required to be transferred at a time when much of the aggregate principal balance of the receivables has been repaid. Due to the reduction in servicing fee as described above, it may be difficult to find a replacement servicer. Consequently, the time it takes to effect the transfer of servicing to a replacement servicer under such circumstances may result in the disruption of normal servicing activities, increased delinquencies and/or defaults on the receivables and delays and/or reductions in the interest and principal payments on your notes.
Commingling of assets by the servicer could reduce or delay payments on the notes.   

Subject to the satisfaction of the following conditions,

 

•    no servicer replacement event exists under the transaction documents; and

 

•    each other condition to making monthly or less frequent deposits as may be set forth in the transaction documents is satisfied;

  
   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.

 

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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.    The servicer is obligated to service the receivables in accordance with its customary practices. The servicer has discretion in servicing the receivables including the ability to grant payment extensions and to determine the timing and method of collection and liquidation procedures. In addition, the servicer may from time to time offer obligors a temporary reduction in payment and/or an opportunity to defer payments. Any of these deferrals or extensions may extend the maturity of the receivables and increase the weighted average life of the notes. However, the servicer must purchase the receivable from the issuing entity if any payment deferral of a receivable extends the term of the receivable beyond the last day of the collection period immediately prior to the final scheduled payment date for the Class E notes.
   In addition, the servicer’s customary practices may change from time to time and those changes could reduce collections on the receivables. Although the servicer’s customary 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 receivables. Consequently, the manner in which the servicer exercises its serving 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.
The ratings of the notes may be withdrawn or lowered, or the notes may receive an unsolicited rating, 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 its final scheduled payment date. Ratings do not consider to what extent the notes will be subject to prepayment or that the principal of any class of notes will be paid prior to the final scheduled payment date for that class of notes, nor do the ratings consider the prices of the notes or their suitability to a particular investor. A rating agency may revise or withdraw the ratings at any time in its sole discretion, including as a result of a failure by the sponsor to comply with its obligation to post information provided to the Hired Agencies on a website that is accessible by a rating agency that is not a Hired Agency. The ratings of any notes may be lowered by a rating agency (including the Hired Agencies) following the initial issuance of the notes as a result of losses on the related receivables in excess of the levels contemplated by a rating agency at the time of its initial rating analysis. Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to replace or supplement any credit support, or to take any other action to maintain any ratings of the notes.
   Accordingly, there is no assurance that the ratings assigned to any note on the date on which the note is originally issued will not be lowered or withdrawn by any rating agency at any time thereafter. If any rating with respect to the notes is revised or withdrawn, the liquidity or the market value of your note may be adversely affected.
   It is possible that other rating agencies not hired by the sponsor may provide an unsolicited rating that differs from (or is lower than) the rating provided by the Hired Agencies. As of the date of this prospectus, the depositor was not aware of the existence of any unsolicited rating provided (or to be provided at a future time) by any

 

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   rating agency not hired to rate the transaction. However, there can be no assurance that an unsolicited rating will not be issued prior to or after the closing date, and 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. Consequently, if you intend to purchase notes, you should monitor whether an unsolicited rating of the notes has been issued by a non-hired rating agency and should consult with your financial and legal advisors regarding the impact of an unsolicited rating on a 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 note may be adversely affected.
Potential rating agency conflict of interest and regulatory scrutiny.    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 rating agencies for their rating services. Furthermore, the rating agencies have been and may continue to be under scrutiny by federal and state legislative and regulatory bodies for their roles in the recent financial crisis and such scrutiny and any actions such legislative and regulatory bodies may take as a result thereof may also have an adverse effect on the price that a subsequent purchaser would be willing to pay for the notes and your ability to resell your notes.
Financial market disruptions 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 notes. The underwriters will do so by offering to buy the notes from investors that wish to sell. However, the underwriters will not be obligated to make offers to buy the notes or otherwise make a market for any class of notes, and may stop making offers at any time. There is no assurance that a market for the offered notes will develop, or if one does develop, that it will continue or that it will 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.
   Additionally, continuing events in the global financial markets, including the failure, acquisition or government seizure of several major financial institutions, the establishment of government bailout programs for financial institutions, problems related to subprime mortgages and other financial assets, the de-valuation of various assets in secondary markets, the forced sale of asset-backed and other securities as a result of the de-leveraging of structured investment vehicles, hedge funds, financial institutions and other entities, government regulation, increased capital requirements for financial institutions, the lowering of ratings on certain asset-backed securities and other market disruptions, such as the current uncertainty surrounding the future of the United Kingdom’s relationship with the European Union, have caused or may in the future cause a significant reduction in liquidity in the secondary market for asset-backed securities. Any of these events could affect the performance or market value of your notes and your ability to sell your notes in the secondary market. Illiquidity can have a severely adverse effect on the prices of

 

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   securities that are especially sensitive to prepayment, credit or interest rate risk, such as the notes.
   There have been times in the past where there have been very few buyers of asset-backed securities, and there may be these times again in the future. 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.
Book-entry system for the notes may decrease liquidity and delay payment.    Because transactions in the notes generally can be effected only through DTC, participants and indirect participants:
  

•    your ability to pledge your beneficial interest in notes to someone who does not participate in the DTC system, or to otherwise take action relating to your beneficial interest in notes, may be limited due to the lack of a physical note;

 

•    you may experience delays in your receipt of payments with respect to your beneficial interest in notes because payments will be made by the indenture trustee, to Cede, as nominee for DTC, rather than directly to you, and DTC will then credit payments received from the issuing entity to the accounts of its participants which, in turn, will credit those amounts to noteholders either directly or indirectly through indirect participants; and

 

•    you may experience delays in your receipt of payments with respect to your beneficial interest in notes in the event of misapplication of payments by DTC, participants or indirect participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities.

   See “The Notes—General”, “Delivery of Notes” and  Book-Entry Registration” in this prospectus.
If your notes are in book-entry form, your rights can only be exercised indirectly.    If your notes are initially issued in book-entry form, you will be required to hold your interest in your notes through DTC in the United States, or Clearstream Banking, société anonyme or Euroclear Bank S.A./NV as operator of the Euroclear System in Europe or Asia. Transfers of interests in the notes within DTC, Clearstream Banking, société anonyme or Euroclear Bank/S.A./NV as operator of the Euroclear System must be made in accordance with the usual rules and operating procedures of those systems. So long as the notes are in book-entry form, you will not be entitled to receive a definitive note representing your interest. Notes initially issued in book-entry form will remain in book-entry form except in the limited circumstances described under the caption “The Notes—Definitive Notes” in this prospectus. Unless and until the notes cease to be held in book-entry form, the transaction parties will not recognize you as a holder of the notes.
   As a result, you will only be able to exercise the rights as a noteholder indirectly through DTC (if in the United States) and its participating organizations, or Clearstream Banking, société anonyme and Euroclear Bank S.A./NV as operator of the Euroclear System (in Europe or Asia) and their participating organizations.

 

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USE OF PROCEEDS

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

 

    purchase the receivables from SC; and

 

    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. In connection with the offering of the offered notes, one or more of the underwriters have agreed to reimburse the issuing entity for certain fees and expenses. See “Underwriting” in this prospectus.

THE ISSUING ENTITY

Limited Purpose and Limited Assets

Santander Drive Auto Receivables Trust 2017-1 is a statutory trust formed on January 31, 2017 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 E notes) are being offered hereby, but the depositor may transfer all or a portion of the certificates to an affiliate or sell all or a portion of the certificates on or after the closing date. However, the portion of the certificates retained by the depositor to satisfy Regulation RR and EU Retention Rules will not be sold or transferred except as permitted by Regulation RR and EU Retention Rules. See “The Sponsor—Credit Risk Retention” and “ EU Risk Retention.” On each payment date, the certificateholders will be entitled to any funds remaining on that payment date after all deposits and distributions of higher priority, 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:

 

    issuing the notes and the certificates;

 

    making payments on the notes and distributions on the certificates;

 

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

 

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

 

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

 

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

 

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

 

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

 

   

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conservation of the assets of the issuing entity and the making of payments on the notes and distributions on the certificates.

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 TrusteesThe Owner Trustee” below. The issuing entity’s fiscal year ends on December 31st.

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

The expected assets of the issuing entity as of the closing date will be as follows:

 

Receivables

   $ 1,224,015,127.29   

Reserve Account – Initial Balance(1)

   $ 12,240,151.27   

 

(1) To be an amount not less than 1.00% of the Pool Balance as of the cut-off date.

The expected liabilities of the issuing entity as of the closing date will be as follows:

 

Class A-1 Asset Backed Notes

   $ 194,000,000   

Class A-2 Asset Backed Notes

   $ 310,000,000   

Class A-3 Asset Backed Notes

   $ 111,670,000   

Class B Asset Backed Notes

   $ 129,750,000   

Class C Asset Backed Notes

   $ 156,670,000   

Class D Asset Backed Notes

   $ 126,080,000   

Class E Asset Backed Notes(1)

   $ 48,960,000   
  

 

 

 

Total

   $ 1,077,130,000   
  

 

 

 

 

(1) The Class  E notes are not being offered hereby.

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. The receivables are substantially all obligations of sub-prime credit quality obligors.

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

 

    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;

 

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

 

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

 

    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;

 

    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;

 

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

 

    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 —also referred to herein as the “owner trustee”—is a national banking association. The owner trustee’s principal place of business is located at 1100 North Market Street, Wilmington, Delaware 19890-0001. Wilmington Trust, National Association has served as owner trustee in numerous asset-backed securities transactions involving auto receivables.

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

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 servicer will be responsible for paying the owner trustee’s fees and for indemnifying the owner trustee against specified losses, liabilities or expenses incurred by the owner trustee in connection with the transaction documents. To the extent these fees and indemnification amounts are not paid by the servicer, they will be payable out of Available Funds as described in “The Transfer Agreements and the Administration Agreement – Priority of Payments” in this prospectus.

For a description of the roles and responsibilities of the owner trustee, see “— Role of the Owner Trustee and Indenture Trustee” and “The Transfer Agreements and the Administration Agreement—Indemnification of the Indenture Trustee and the Owner Trustee” in this prospectus.

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

 

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appointment by the successor owner trustee for such issuing entity and payment of all fees and expenses owed to the outgoing owner trustee.

The Indenture Trustee

Wells Fargo Bank, National Association (“Wells Fargo”), a national banking association, is the “indenture trustee” under the indenture for the benefit of the noteholders. Wells Fargo has served and currently is serving as indenture trustee for numerous securitization transactions and programs involving pools of motor vehicle receivables.

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

The corporate trust office for the indenture trustee is located at Wells Fargo Center, 600 S, 4th Street, MAC N9300-061, Minneapolis, MN 55479, Attention: Corporate Trust Services – Asset-Backed Administration, Santander Drive Auto Receivables Trust 2017-1.

On June 18, 2014, a group of institutional investors filed a civil complaint in the Supreme Court of the State of New York, New York County, against Wells Fargo, in its capacity as trustee under 276 residential mortgage backed securities (“RMBS”) trusts, which was later amended on July 18, 2014, to increase the number of trusts to 284 RMBS trusts. On November 24, 2014, the plaintiffs filed a motion to voluntarily dismiss the state court action without prejudice. That same day, a group of institutional investors filed a putative class action complaint in the United States District Court for the Southern District of New York (the “District Court”) against Wells Fargo, alleging claims against the bank in its capacity as trustee for 274 RMBS trusts (the “Federal Court Complaint”). In December 2014, the plaintiffs’ motion to voluntarily dismiss their original state court action was granted. As with the prior state court action, the Federal Court Complaint is one of six similar complaints filed contemporaneously against RMBS trustees (Deutsche Bank, Citibank, HSBC, Bank of New York Mellon and U.S. Bank) by a group of institutional investor plaintiffs. The Federal Court Complaint against Wells Fargo alleges that the trustee caused losses to investors and asserts causes of action based upon, among other things, the trustee’s alleged failure to: (i) notify and enforce repurchase obligations of mortgage loan sellers for purported breaches of representations and warranties, (ii) notify investors of alleged events of default, and (iii) abide by appropriate standards of care following alleged events of default. Relief sought includes money damages in an unspecified amount, reimbursement of expenses, and equitable relief. Other cases alleging similar causes of action have been filed against Wells Fargo and other trustees in the District Court by RMBS investors in these and other transactions, and these cases against Wells Fargo are proceeding before the same District Court judge. A similar complaint was also filed May 27, 2016 in New York state court by a different plaintiff investor. On January 19, 2016, an order was entered in connection with the Federal Court Complaint in which the District Court declined to exercise jurisdiction over 261 trusts at issue in the Federal Court Complaint; the District Court also allowed plaintiffs to file amended complaints as to the remaining, non-dismissed trusts, if they so chose, and three amended complaints have been filed. On December 17, 2016, the investor plaintiffs in the 261 trusts dismissed from the Federal Court Complaint filed a new complaint in New York state court (the “State Court Complaint”). Motions to dismiss all of the actions are pending except for the recently filed State Court Complaint. There can be no assurances as to the outcome of the litigations, or the possible impact of the litigations on the trustee or the RMBS trusts. However, Wells Fargo denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of any losses to investors, and that it has meritorious defenses, and it intends to contest the plaintiffs’ claims vigorously.

The indenture trustee will make each monthly statement available to the noteholders via the indenture trustee’s internet website at http://www.ctslink.com. For assistance with regard to this service, investors may call the indenture trustee’s corporate trust office at (866) 846-4526.

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

 

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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 or indenture 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, as applicable, or to make any investigation of matters arising thereunder or to institute, conduct or defend any 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 AgreementAsset Representations Review” or to the investors’ rights to communicate with other investors described under “The IndentureNoteholder Communication; Lists of Noteholders”), unless those noteholders have offered to the owner trustee or indenture trustee reasonable security or indemnity against the reasonable costs, expenses and liabilities which may be incurred therein or thereby.

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 co-trustees or separate trustees, all rights, powers, duties and obligations conferred or imposed upon the owner trustee or indenture trustee by the sale and servicing agreement, trust agreement, administration agreement or indenture, as applicable, will be conferred or imposed upon the owner trustee or indenture trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction in which the owner trustee or indenture trustee is incompetent or unqualified to perform specified acts, singly upon the separate trustee or co-trustee who will exercise and perform any rights, powers, duties and obligations solely at the direction of the owner trustee or indenture trustee.

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

The owner trustee and indenture trustee will be entitled to certain fees and indemnities described under “The Transfer Agreements and the Administration AgreementFees 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

 

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the benefit of any security issued by an issuing entity and to prepare and file registration statements, 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., 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 50 securitizations of sub-prime 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 (“SC Holdings”). Shares of SC Holdings’ common stock have been listed for trading on the New York Stock Exchange under the ticker symbol “SC”. Santander Holdings USA, Inc., a Virginia corporation (“SHUSA”) and wholly-owned direct subsidiary of Banco Santander, S.A., is the largest shareholder of SC Holdings. SHUSA currently owns approximately 59% of the common stock of SC Holdings. On July 2, 2015, SC Holdings announced the departure of Thomas G. Dundon from his roles as the Chairman and Chief Executive Officer of SC and from other positions that he held with subsidiaries of SC Holdings, effective as of the close of business on July 2, 2015. In connection with his departure, on July 2, 2015, Mr. Dundon entered into a separation agreement, pursuant to which, among other things, SC Holdings was deemed to have irrevocably exercised its option to acquire all of the shares of SC common stock owned indirectly by Mr. Dundon, subject to the receipt of all required regulatory approvals. On April 1, 2016, Mr. Dundon submitted his resignation from the SC Holdings Board, effective immediately, to pursue other interests.

The sponsor is party to, or is periodically otherwise involved in, reviews, investigations, and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the Federal Reserve, the CFPB, the DOJ, the SEC, the FTC and various state regulatory agencies. Since July 2014, the sponsor has received civil subpoenas and civil investigative demands from various federal and state agencies, including from the DOJ under the Financial Institutions Reform, Recovery and Enforcement Act, the SEC and several state attorneys general, requesting the production of documents and communications that, among other things, relate to the origination, underwriting and securitization of auto loans for varying time periods since 2007. Investigations, litigation proceedings and/or information-gathering requests that the sponsor or any of its subsidiaries or affiliates are involved in, or may become involved in, may result in 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 to perform its duties under the transaction documents.

SC has been advised by SHUSA that SHUSA became subject to a written agreement (the “Written Agreement”) with the Federal Reserve Bank of Boston. The Written Agreement requires SHUSA to make enhancements with respect to, among other matters, board and senior management oversight of the consolidated organization, risk management, capital planning and liquidity management. We do not expect the Written Agreement to have any adverse impact on either SC’s or the issuing entity’s ability to perform any of its respective obligations under the transaction documents.

In October 2016, SC Holdings filed amendments to certain periodic reports previously filed with the SEC after determining that its previously issued audited financial statements for the years ended December 31, 2015, 2014 and 2013, and previously issued unaudited financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, 2015 and 2014, June 30, 2015 and 2014 and September 30, 2015 and 2014 should no longer be relied on and should be restated due to certain errors identified in such financial statements relating to (i) SC Holdings’ methodology for accreting dealer discounts, subvention payments from manufacturers and capitalized origination costs, (ii) SC Holdings’ lack of consideration of net discounts when estimating the allowance for credit losses and (iii) the discount rate used in determining the impairment for loans accounted for as

 

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troubled debt restructurings. SC Holdings has reviewed all critical relationships and does not foresee a material interruption in, or change to, normal business activities related to the delayed and amended filings. The financial statement errors relate to non-cash items and have no material impact on net cash from operating activities, investing activities or financing activities.

Additional information about SC Holdings, including information contained in required annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, is on file with the SEC under the name “Santander Consumer USA Holdings Inc.” and file number 001-36270.

No securitizations sponsored by SC have 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.

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 (which for EU risk retention purposes will be a wholly-owned special purpose subsidiary of SC) of an “eligible vertical interest” of at least 5% of each class of notes and certificates issued by the issuing entity.

The depositor or another majority-owned affiliate of SC will retain 5% of the initial Note Balance of each class of notes and 5% of the aggregate Percentage Interests in the certificates to satisfy the obligations of SC under Regulation RR, though SC or one or more of its affiliates may retain more than 5% of one or more classes of notes or of the certificates. The material terms of the notes are described in this prospectus under “The Notes.” The notes of each class retained by SC or one or more of its majority-owned affiliates as part of the “eligible vertical interest” will generally have the same terms as all other notes in that class, except that such retained notes may be subject to additional transfer restrictions and will not be included for purposes of determining whether a required percentage of any class of notes have taken any action under the indenture or any other transaction document, as described in “The Notes – Notes Owned by Transaction Parties.” The material terms of the certificates are described in this prospectus under “Summary of Terms – The Certificates.”

In accordance with Regulation RR, if the amount of the eligible vertical interest retained at closing is materially different from the amount described above, within a reasonable time after the closing date SC will disclose that material difference. This disclosure will be included in the first periodic report on Form 10-D filed by the depositor after the closing date.

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 vertical interest may be transferred to any other majority-owned affiliate of SC on or after the closing date.

EU Risk Retention

On the closing date, SC will covenant and agree, with reference to Article 405(1) of the EU CRR, Article 51(1) of the AIFM Regulation and Article 254(2) of the Solvency II Regulation (see “Legal Investment – Requirements for Certain European Regulated Investors and Affiliates” in this prospectus), in each case as in effect on the closing date, that:

(a)    SC, as “originator” for the purposes of those EU Retention Rules, will retain upon issuance of the notes and on an ongoing basis a material net economic interest (the “Retained Interest ) of not less than 5% in the securitization transaction described in this prospectus, in the form of retention of at least 5% of the nominal value of each of the tranches sold or transferred to investors in accordance with the text of option (a) of each of Article

 

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405(1) of the EU CRR, Article 51(1) of the AIFM Regulation and Article 254(2) of the Solvency II Regulation, by holding all the membership interest in the depositor (or one or more other wholly-owned special purpose subsidiaries of SC), which in turn will retain at least 5% of the nominal value of each class of notes (including the Class E notes) and at least 5% of the aggregate Percentage Interests in the certificates;

(b)    SC will not (and will not permit the depositor or any of its other affiliates to) sell, hedge or otherwise mitigate its credit risk under or associated with the Retained Interest, except to the extent permitted in accordance with those EU Retention Rules;

(c)    SC will not change the manner in which it retains the Retained Interest while any of the offered notes are outstanding, except under exceptional circumstances in accordance with those EU Retention Rules; and

(d)    SC will provide ongoing confirmation of its continued compliance with its obligations in clauses (a), (b) and (c) in this paragraph (i) in or concurrently with the delivery of each monthly report to noteholders, (ii) on 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 performance of the receivables or the notes or any material breach of the transaction documents.

However, each prospective investor is required to independently assess and determine the sufficiency of the information described above and in this prospectus generally for the purposes of complying with the EU Retention Rules referred to above and any corresponding national measures which may be relevant and none of SC, the depositor, the issuing entity, the underwriters, their respective affiliates nor any other party to the transactions described in this prospectus makes any representation that the information described above or in this prospectus is sufficient in all circumstances for such purposes.

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. The 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.

Receivables and Calculation Methods

Each receivable is a fully amortizing, fixed level monthly payment contract which will amortize the full amount of the receivable over its term, assuming that the obligor does not pay any installment after its due date. Each contract provides for the allocation of payments according to the “simple interest method” of allocating a fixed level payment on an obligation between principal and interest, pursuant to which the portion of such payment that is allocated to interest is equal to the product of the fixed rate of interest on such obligation, multiplied by the unpaid principal balance multiplied by the period of time (expressed as a fraction of a year, based on the actual number of days in the calendar month and 365 days in the calendar year) elapsed since the preceding payment under which the obligation was made and the remainder of such payment is allocable to principal.

Under the simple interest method, payments on receivables are applied first to interest accrued through the date immediately preceding the date of payment and then to unpaid principal. Accordingly, if an obligor pays an installment before its due date, the portion of the payment allocable to interest for the payment period will be less than if the payment had been made on the due date, the portion of the payment applied to reduce the principal balance will be correspondingly greater, and the principal balance will be amortized more rapidly than scheduled. Conversely, if an obligor pays an installment after its due date, the portion of the payment allocable to interest for the payment period will be greater than if the payment had been made on the due date, the portion of the payment applied to reduce the principal balance will be correspondingly less, and the principal balance will be amortized more slowly than scheduled.

 

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The contract term is determined by a number of factors which may include the age and mileage of the financed vehicle. Interest rates may be determined on the basis of the credit quality of the obligor and/or the maximum rate which may be charged by law. 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. Receivables that represent the obligations of sub-prime credit obligors tend to have higher interest rates than receivables that represent the obligations of prime credit obligors.

Receivable Origination Channels

SC primarily originated the receivables by purchasing motor vehicle installment sales contracts from dealers pursuant to a dealer agreement between SC and the dealer. In addition, SC originated some of the receivables (i) directly from the obligor through its direct lending platform and (ii) 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.

Under its direct lending platform, SC originates loans through applications submitted electronically over the internet. If an application is approved under SC’s credit guidelines, the applicant is provided a loan packet including a note and security agreement. The completed packet is submitted by the dealer (or, in some cases, by the obligor) and verified against SC’s credit and pricing guidelines prior to funding.

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.

Underwriting

Receivables originated by SC generally are approved based upon its pricing and origination guidelines, with particular emphasis on the following underwriting criteria: (i) collateral type and quality, such as vehicle age and mileage; (ii) loan-to-value ratio (“LTV”); (iii) amount of cash down payment and/or trade equity; (iv) affordability measures (loan-to-income ratio, payment-to-income ratio, debt-to-income ratio, minimum income and maximum payment amount) and (v) the length and depth of credit history.

Credit Risk Management

Overview

SC’s credit risk management department monitored origination activities and portfolio performance and supported senior operations management with respect to the origination of the receivables originated by SC. The department monitored and analyzed loan applicant and credit bureau data, credit score information, loan structures and pricing terms. The department was also responsible for developing SC’s credit scorecards, pricing models and monitoring their performance.

SC’s credit risk management department monitored portfolio performance at a variety of levels including total company, market and dealer. The analysis of the results was the basis for ongoing changes to origination strategies including credit policy, risk-based pricing programs and eventual changes to the scoring model. The department also monitored adherence to underwriting guidelines.

 

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Credit Scoring and Loss Forecasting

SC utilized a proprietary credit scoring model to support the credit decision process and to differentiate applicant credit risk with respect to the origination of the receivables originated by SC. Based on this risk-ranking, SC determined the expected default rate for each applicant and was able to rank order credit risk accordingly, which enabled SC to evaluate credit applications for approval and tailor loan pricing and structure. SC’s credit scoring model was developed utilizing a statistical analysis of consumer origination data, pooled data purchased from the national credit bureaus and subsequent portfolio performance for SC.

SC’s credit scoring model considered data contained in the applicant’s credit application and credit bureau report (including the length and depth of credit history) as well as the structure of the proposed receivable and produced a statistical assessment of these attributes. This assessment was used to segregate applicant risk profiles and determine whether risk was acceptable and the price SC should charge for that risk. SC’s credit scorecards were monitored through comparison of actual versus projected performance by score. While SC employed a credit scoring model in the credit approval process, credit scoring does not eliminate credit risk.

In addition to generating a credit score, SC also generated a proprietary loss forecasting score for each funded loan. The proprietary loss forecasting score was used by SC to further assess the probability that a funded loan will default, and was 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 loss forecasting model.

SC recently developed an enhancement to its credit scoring model designed to more accurately rank order risk with respect to the origination of the receivables. Such enhancement was implemented in a phased approach and was fully employed in the origination process by the end of 2016.

Pricing Model

SC utilized a proprietary pricing model to develop a risk-based pricing program and credit policy. This pricing model allowed SC to underwrite loans that met minimum profit thresholds by considering various inputs including credit scores, deal structure, credit history, collateral quality and various expenses.

Contracting and Funding

Receivables contracts are originated in either tangible or electronic form. Approximately 4.19% 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 a third party to facilitate the process of creating and storing those electronic contracts. The third party’s 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 party’s system allows for the transmission, storage, access and administration of electronic contracts. Through use of the third party’s system, a dealer originates electronic retail installment contracts and then transfers these electronic contracts to SC.

The third-party system uses 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

 

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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.

When SC received a completed application through its direct lending program, SC performed a series of procedures designed (i) to substantiate the accuracy of information critical to SC’s credit decision and (ii) to confirm that any documentation required complied with SC’s underwriting criteria and state and consumer statutes and regulations.

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 50 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, and intends to delegate certain of its responsibilities with respect to performing receivables to Santander Consumer International Puerto Rico LLC (“SCI”) on the closing date. SCI is a Puerto Rico limited liability company formed on November 17, 2015. SCI is a wholly-owned direct subsidiary of the servicer. SCI has no servicing history and currently does not own any receivables for its own account. However, SCI has hired certain of the servicer’s former key servicing personnel, and SCI will utilize the servicer’s systems in connection with the fulfillment of the duties delegated to it by the servicer. In addition, the servicing practices and procedures of SCI with respect to the receivables are substantially the same as the servicing practices and procedures of the servicer with respect to such receivables. See “Servicing by SC” below for a description of such practices and procedures.

The subservicing arrangement between the servicer and SCI is governed by the servicing agreement, dated as of July 15, 2016, by and between the servicer and SCI and the program portfolio schedule (SDART Publicly Registered Transactions), dated as of July 15, 2016, by and between the servicer and SCI (collectively, the “Subservicing Agreement”). If the servicer delegates certain servicing responsibilities to SCI on the closing date, a copy of the subservicing agreement will be filed on Form 8-K by the issuing entity. Among the responsibilities that the servicer intends to delegate to SCI is the responsibility to manage performing receivables, including but not limited to updating records regarding collections, responding to inquiries of obligors, investigating delinquencies and sending invoices or payment coupons to obligors. The subservicing agreement requires SCI to perform such services using the degree of skill and attention that SCI exercises with respect to all comparable motor vehicle receivables that it services for itself or others and that is consistent with its customary servicing practices. The servicer does not intend to delegate to SCI responsibilities relating to non-performing receivables. The servicer also does not intend to delegate to SCI responsibilities that are not directly related to asset servicing, such as the preparation of the monthly report to noteholders or the preparation of payment instructions to the indenture trustee. Further, the servicer will continue to act as custodian of the contract files for the receivables.

The subservicing agreement provides that, upon the occurrence of a servicing trigger with respect to a receivable, all servicing activities relating to such receivable immediately shall be transferred to the servicer and SCI shall have no further duties with respect to such receivable. If the event which caused such servicing trigger is cured or no longer exists, all servicing activities with respect to the related receivable will immediately be transferred to SCI. For purposes of this paragraph, a “servicing trigger” will apply with respect to a receivable and any date of determination if such receivable does not meet the following characteristics as of the close of business on such date: (a) is not more than 60 days past due as of the close of business on such date; (b) is designated on the servicer’s or

 

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SCI’s system as “Open,” indicating that the receivable is not closed; (c) is designated on the servicer’s or SCI’s system as “Active,” indicating that the receivable is not charged-off; (d) has a blank “Status Code” on the servicer’s or SCI’s system, which code indicates that a receivable is in a special servicing category such as (without limitation): Assigned for Repo, Bankruptcy, Deficiency, Insurance, Post Charge-off, Repossessed, Unwind or Uncollectible (each as defined by the servicer or SCI, as applicable); and (e) has a blank “Class Code” on the servicer’s or SCI’s system, which code indicates that a receivable is in a special servicing sub-category or “Status Code,” such as (without limitation): Chapter 13, Chapter 7, Chapter 13 Paying, Chapter 7 Paying, Abandon, Assigned to Attorney, Bankruptcy Deficiency, Credit Bureau Dispute, Cease and Desist, Demand Call, Dealer Note Funded, Dealer Unwind, Garnishment, Government Seizure, Impound, Insurance Deficiency, Involuntary Surrender, Lien Loss, Non Collateralized, Redemption Pending, Skip, Small Balance, Sailors and Soldiers, Stolen or Voluntary Surrender (each as defined by the servicer or SCI, as applicable).

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.

SCI will be entitled to a fee payable directly by the servicer and not by the issuing entity or from Available Funds.

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

SERVICING BY SC

Overview

The following disclosure relating to the servicing practices and procedures of SC is also applicable to SCI, as subservicer.

SC’s servicing practices are closely integrated with the origination platform of SC. This results in the efficient exchange of information which aids both servicing and evaluation and modification of product design and underwriting criteria.

Collections

Collections are primarily performed at the servicing centers in North Richland Hills, Texas, Lewisville, Texas, Centennial, Colorado and Mesa, Arizona. The servicing practices associated with sub-prime receivables vary depending on the behavioral score of the obligor and include: (i) attempting telephonic communication after a missed payment; (ii) making evening and weekend collection calls; and (iii) if the collection department is unsuccessful in contacting an obligor by phone, alternative methods of contact, such as location gathering via references, employers and landlords, physical letter delivery, credit bureaus or cross directories are pursued. SC uses monthly billing statements to serve as a reminder to obligors as well as an early warning mechanism in the event an obligor has failed to notify SC of an address change. Payment remittance channels include mail through SC’s lockbox service, overnight delivery services, a customer website, an interactive voice response system, third party payment processing services and verbally with SC’s customer service and collections staff. Credit, debit and ACH payments are all accepted through these payment avenues.

On a daily basis, SC’s integrated servicing system determines accounts eligible for treatment with its early stage, late stage, and loss prevention servicing practices based upon risk of the obligor and projected loss severity. Risk assessment directs several courses of action, including delaying collection activity based upon the likelihood of self-curing, directing an account to SC’s early stage delinquency management group or forwarding the account for accelerated/specialty treatment (i.e., bankruptcy, repossessions, impounded units, skip tracing, etc.). To assist in the servicing process, SC’s employees have the ability to access original contract documents through its imaging system, as well as the availability to offer a due date change, extension, temporary reduction in payments, and in rare cases, a hardship re-write.

 

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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 behavioral 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. 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.

At times, SC, in accordance with its servicing policies, offers payment extensions to obligors who have encountered temporary financial difficulty. SC has developed a proprietary score which assesses the obligors’ capacity to make future payments. SC currently utilizes an industry-standard extension policy. A collector must obtain a written or recorded acknowledgment from the obligor before granting an extension. No extensions may be granted until at least 6 months after the account was originated; exceptions to the extension policy, including hardship re-writes, are limited and require management approval. SC may also temporarily reduce the monthly payment amount for certain obligors for a maximum of 6 months. This temporary reduction may only be granted after an obligor has made at least 6 payments and is only offered once during the life of a loan.

SC may also, in accordance with its servicing policies, extend the term of a receivable to the extent such receivable has a remaining balance that will not be paid off at maturity through the application of the contractual monthly payment amount due to a date which will permit the related obligor to continue to make their contractual monthly payment amount each month to repay the remaining balance of the receivable. Any such extensions will be granted within six months of the maturity date of the receivable.

Also, with respect to certain receivables, to the extent such a receivable has a remaining balance at maturity, if the related obligor continually makes its contractual monthly payment on the receivable, the maturity date will be automatically extended by one month each month until the related receivable is paid off in the ordinary course.

Charge-off Policy

Repossessions. Receivables related to repossessed vehicles are charged off in the month during which the earliest of any of the following occurs: (a) liquidation of the repossessed vehicle; (b) 91 days following the vehicle’s repossession date; and (c) the month in which the account becomes contractually delinquent greater than 4 months. The amount of the initial charge-off shall be equal to the then current outstanding receivable principal balance less the sum of the proceeds from the disposition of the vehicle, net of the costs incurred in repossession, 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.

Bankruptcies. If a notice of bankruptcy with respect to a receivable is received, the receivable will be charged off (at the time described in the next sentence) in an amount equal to the current outstanding principal balance of the account. Pursuant to SC’s servicing practices in effect as of the date of this prospectus, the charge-off will be made upon the earlier to occur of (a) the month in which the account becomes contractually delinquent greater than 4 months or (b) receipt of notice of the results of the bankruptcy proceeding, indicating that a charge-off or adjustment for a “cram down” is appropriate. However, SC expects that it will implement changes in its charge-off policy during the first quarter of 2017, pursuant to which such charge-offs with respect to bankruptcy filings will be made upon the earlier to occur of (a) the end of the calendar month following the calendar month in which SC receives notice of the bankruptcy filing and (b) receipt of notice of the results of the bankruptcy proceeding, indicating that a charge-off or adjustment for a “cram down” is appropriate. Any notice of the result of a bankruptcy proceeding received after the receivable is charged off will result in the reinstatement of the receivable under the

 

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new terms or the recovered vehicle being sold following repossession, as appropriate. The resulting collections will be treated as recoveries.

Skips. A “skip”, an account for which SC has been unsuccessful in locating either the obligor or the financed vehicle, is charged off in an amount equal to the then current outstanding principal balance of the receivable in the month the account becomes contractually delinquent greater than 4 months. If continued collection efforts result in subsequent contact with the obligor or the financed vehicle and the financed vehicle is repossessed and sold, then any proceeds from the disposition of the financed vehicle (net of the costs incurred in the repossessing, storing and disposing of the vehicle) and any rebates from the cancellation of any outstanding insurance policies or extended service contracts are recorded as recoveries.

Thefts or collisions. Theft or collision accounts are charged off in the month in which the account becomes contractually delinquent greater than 4 months. The charge-off is equal to the then current outstanding balance of the receivable. Insurance proceeds received after an account is charged off are recorded as recoveries.

Receivables are placed in “non-accrual” status when they are greater than 60 days delinquent. Accrued and unpaid interest is reversed at the time the receivable is placed in non-accrual status. Charged-off receivables are pursued for any deficiencies by SC until such time as it is judged that no further recoveries can be effected. SC has the ability to establish payment schedules for deficiencies and/or negotiate lump sum settlements of deficiencies. However, SC will be subject to certain limitations in the sale and servicing agreement with respect to any modifications of the receivables.

Repossessions

Repossessions are subject to prescribed legal procedures, which include peaceful repossession, one or more obligor notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the obligor. Some jurisdictions provide the obligor with reinstatement or redemption rights. Repossessions are handled by independent repossession firms managed by “Repossessions Consolidator” companies contracted by SC. All repossessions, other than those relating to bankrupt accounts or previously charged off accounts, must be approved by a collections manager. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the receivable. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the receivable, and the resulting deficiency is charged off. The servicer pursues collection of deficiencies when it deems such action to be appropriate.

The decision to repossess a vehicle is influenced by many factors, such as previous receivable history, reasons for delinquency, and cooperation of the obligor. As part of the collection process, all practical means of contacting the obligor are attempted. If at any point a collector feels that there is little or no chance of establishing contact with the obligor, or that the obligor will not make the required payments, the collector will submit such receivable for repossession. The decision to repossess is based on an internal repossession score and will generally be made when the loan becomes approximately 90 days delinquent.

Once the decision to repossess a vehicle is made, the account is referred to an outside agency that handles the actual repossession. Most state laws require that the obligor be sent a “Notice of Intent to Sell,” which informs the obligor of the lender’s intent to sell the repossessed vehicle. The various states provide for a period of time, generally 10 to 20 days, during which the obligor may have the right, depending on the applicable statute, to either reinstate the receivable by making all past due payments and paying the repossession and storage expenses of the vehicle or by paying the receivable in full. If the obligor does not exercise his right to reinstate the receivable or redeem the vehicle, as provided by the applicable statute, the vehicle is sold at public auction or at a private sale. Prior to the sale, a repossessed vehicle undergoes evaluation and, if necessary, extensive reconditioning is performed in order to maximize recovery value. The vehicle is usually sold within 30 to 60 days after being repossessed. After the “Notice of Intent to Sell” expiration date, applications are made for rebates on any extended warranty or life, accident and health insurance policies that may have been financed as part of the vehicle purchase.

 

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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 or affiliate, as 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. The receivable is subject to repurchase by SC if the originator’s security interest 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.

Insurance

Initially, all of the receivables owned by the issuing entity are covered by physical damage insurance policies maintained by the obligors and the originator is named as loss payee. SC does not use force-placed insurance if an obligor fails to maintain any required insurance. Since obligors may choose their own insurers to provide the required coverage, the specific terms and conditions of their policies may vary.

Prior Securitization Transactions

SC’s specific servicing policies and practices may change over time. None of the securitization transactions sponsored by SC have 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.

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 Radian Group, Inc. (NYSE: RDN), and 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 60 auto and equipment loan, lease and dealer floorplan and credit card securitization transactions since 2015.

Clayton is a leading provider 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 has 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 has also performed these services for transactions involving auto loans, credit cards, commercial mortgage loans, student loans, timeshare loans and boat and recreational vehicle loans.

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

 

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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 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) and (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 ReviewDelinquency 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 AgreementAsset 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 ReviewFees and Expenses for Asset Review” below and will be indemnified as described under “The Transfer Agreements and the Administration Agreement—Asset Representations ReviewIndemnification 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 AgreementAsset Representations Review” below.

AFFILIATIONS AND CERTAIN RELATIONSHIPS

The following parties are all affiliates and are all direct or indirect subsidiaries of Banco Santander, S.A.: the depositor, Santander Investment Securities Inc., 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/or used automobiles, light-duty trucks and vans manufactured

 

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by a number of motor vehicle manufacturers. The receivables to be transferred to the issuing entity have been or will be originated by the originator. See “The Originator” in this prospectus.

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.

Characteristics of the Receivables

The characteristics set forth in this section are based on the pool of receivables as of the cut-off date.

As of the cut-off date, the receivables in the pool described in this prospectus had an aggregate principal balance of $1,224,015,127.29.

As of the cut-off date, each receivable in the pool:

 

    had an original term to maturity not more than 75 months;

 

    had a remaining term of at least 4 months and not more than 75 months;

 

    was related to the purchase or refinancing of a new or used automobile, light-duty truck or van;

 

    had a contract rate of not less than 0.00%;

 

    had a remaining principal balance of at least $505.80;

 

    was not more than 30 days past due;

 

    was originated in the U.S. and was not identified on the records of the servicer as being subject to any pending bankruptcy proceeding; and

 

    satisfied the other criteria set forth under “The Transfer Agreements and the Administration Agreement—Representations and Warranties” in this prospectus.

Each of the receivables will be 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 “The Receivables Pool—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.

Exceptions to Underwriting Criteria

Receivables originated under SC’s underwriting guidelines are approved based on either (i) a system-driven origination process defined by SC’s standard credit policy or (ii) the authority of a credit underwriter. SC’s centralized credit and originations department monitors all applications and actively manages the rate of approval of applications to defined tolerances and limits.

 

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As described in “The Originator—Underwriting” and “The Originator—Credit Risk Management”, the majority of the receivables originated by SC are initially approved based on pricing and origination guidelines involving a complex, system-driven process. This system-driven process controls the initial credit decision and approval process without any credit underwriter discretion. SC’s overall credit policy takes into account multiple factors, including but not limited to (i) LTV; (ii) affordability measures, such as loan-to-income ratio, payment-to-income ratio, debt-to-income ratio, minimum income and maximum payment amount; (iii) amount of cash down payment and/or trade equity; (iv) collateral type and quality, such as vehicle age and mileage; and (v) the length and depth of credit history.

Under SC’s standard underwriting guidelines, from time to time contracts are evaluated based on the system-driven application of the credit policies in conjunction with a risk-adjusted pricing model. This process provides for system-driven evaluation of contracts based on the above factors and credit underwriter approval consistent with SC’s underwriting guidelines.

Additionally, under SC’s standard underwriting guidelines, certain contracts are approved with exceptions from the credit policies. In some cases and on a limited basis, contracts with exceptions from the credit policies are approved by credit underwriters and are then tracked and monitored for performance.

None of the receivables in the pool was originated with exceptions to SC’s underwriting guidelines.

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 (the “asset-level data”) as an exhibit to a Form ABS-EE that was filed by the issuing entity on February 16, 2017, 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

The composition, distribution by loan-to-value ratio, FICO® score, loss forecasting score, annual percentage 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 are set forth in the tables below.

 

 

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Composition of the Pool of Receivables

As of the Cut-off Date

 

     New   Used   Total

Aggregate Outstanding Principal Balance

   $481,921,560.11   $742,093,567.18   $1,224,015,127.29

Number of Receivables

   19,735   47,062   66,797

Percentage of Aggregate Outstanding Principal Balance

   39.37%   60.63%   100.00%

Average Outstanding Principal Balance

   $24,419.64   $15,768.42   $18,324.40

Range of Outstanding Principal Balances

   $505.80 to $72,363.06   $507.36 to $63,490.88   $505.80 to $72,363.06

Weighted Average Contract Rate(1)

   14.23%   16.50%   15.60%

Range of Contract Rates

   0.00% to 27.99%   0.00% to 29.17%   0.00% to 29.17%

Weighted Average Remaining Term(1)

   67 months   63 months   64 months

Range of Remaining Terms(2)

   4 months to 75 months   4 months to 72 months   4 months to 75 months

Weighted Average Original Term(1)

   73 months   70 months   71 months

Range of Original Terms(2)

   18 months to 75 months   24 months to 72 months   18 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.

Distribution of the Pool of Receivables

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%

     17,960         26.89   $ 348,907,537.20         28.51

100.00% - 109.99%

     13,359         20.00        263,488,664.62         21.53   

110.00% - 119.99%

     14,738         22.06        268,889,026.04         21.97   

120.00% - 129.99%

     11,264         16.86        194,015,546.37         15.85   

130.00% - 139.99%

     8,030         12.02        128,423,188.63         10.49   

140.00% - 149.99%

     1,175         1.76        16,812,747.96         1.37   

150.00% and greater

     271         0.41        3,478,416.47         0.28   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $  1,224,015,127.29         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 book value of the financed vehicle. Book value is determined by SC in accordance with its origination policy, and no assurance can be given that the book value is reflective of the value of the financed vehicle at any time.
(2)  Sum of percentages may not equal 100% due to rounding.

 

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Table of Contents

Distribution of the Pool of Receivables

By FICO® Score

As of the Cut-off Date

 

FICO® Score(1) Range

   Percentage of Total
Aggregate Outstanding
Principal Balance(2)
 

1 – 500

     2.77

501 – 550

     11.39   

551 – 600

     27.18   

601 – 650

     28.97   

651 and higher

     19.02   

Null FICO® Score

     10.68   
  

 

 

 

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—Credit scores, loss forecasting 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

By Loss Forecasting Score

As of the Cut-off Date

 

SC Loss

Forecasting Score(1)

   Percentage of Total
Aggregate Outstanding
Principal Balance(2)
 

450 and lower

     1.21

451 – 500

     14.63   

501 – 550

     44.06   

551 – 600

     22.36   

601 – 650

     10.92   

651 – 700

     4.47   

701 – 750

     1.57   

751 and higher

     0.77   
  

 

 

 

Total

     100.00
  

 

 

 

 

(1)  The loss forecasting score is a proprietary score used by SC. Under SC’s scoring model, a loss forecasting 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 loss forecasting system is not comparable to a score from a credit bureau or a FICO® score. Further, a loss forecasting score may not be an accurate predictor of the likely risk or quality of the related receivable. See “Risk Factors—Credit scores, loss forecasting 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.

 

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Table of Contents

Distribution of the Pool of Receivables

By Annual Percentage Rate

As of the Cut-off Date

 

Annual Percentage

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%

     30         0.04   $ 419,669.19         0.03

0.001% - 1.000%

     4         0.01        93,739.36         0.01   

1.001% - 2.000%

     42         0.06        946,958.64         0.08   

2.001% - 3.000%

     148         0.22        3,289,793.59         0.27   

3.001% - 4.000%

     637         0.95        14,113,518.95         1.15   

4.001% - 5.000%

     201         0.30        4,398,816.57         0.36   

5.001% - 6.000%

     286         0.43        6,584,301.07         0.54   

6.001% - 7.000%

     687         1.03        16,745,696.12         1.37   

7.001% - 8.000%

     1,167         1.75        27,335,740.62         2.23   

8.001% - 9.000%

     1,534         2.30        36,501,185.10         2.98   

9.001% - 10.000%

     1,802         2.70        41,585,632.26         3.40   

10.001% - 11.000%

     2,420         3.62        54,668,638.15         4.47   

11.001% - 12.000%

     3,023         4.53        71,006,596.53         5.80   

12.001% - 13.000%

     3,187         4.77        72,208,100.66         5.90   

13.001% - 14.000%

     3,468         5.19        74,766,805.12         6.11   

14.001% - 15.000%

     4,508         6.75        93,296,236.51         7.62   

15.001% - 16.000%

     4,952         7.41        98,224,004.92         8.02   

16.001% - 17.000%

     5,678         8.50        108,898,370.11         8.90   

17.001% - 18.000%

     8,818         13.20        156,489,351.09         12.78   

18.001% - 19.000%

     5,531         8.28        89,513,927.14         7.31   

19.001% - 20.000%

     3,589         5.37        54,680,418.43         4.47   

20.001% - 21.000%

     4,276         6.40        60,212,982.51         4.92   

21.001% - 22.000%

     2,864         4.29        39,151,886.88         3.20   

22.001% - 23.000%

     1,962         2.94        26,119,448.13         2.13   

23.001% - 24.000%

     2,318         3.47        29,978,650.02         2.45   

24.001% - 25.000%

     1,900         2.84        21,530,862.52         1.76   

25.001% - 26.000%

     863         1.29        10,153,727.15         0.83   

26.001% - 27.000%

     534         0.80        6,523,001.23         0.53   

27.001% - 28.000%

     363         0.54        4,533,924.70         0.37   

28.001% - 29.000%

     3         0.00 (2)      28,692.17         0.00 (2) 

29.001% - 30.000%

     2         0.00 (2)      14,451.85         0.00 (2) 
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  Sum of percentages may not equal 100% due to rounding.
(2)  Less than 0.01% but greater than 0.00%.

 

51


Table of Contents

Geographic Distribution of the Pool of Receivables

By State of Residence

As of the Cut-off Date

 

State of Residence(1)

   Number of
Receivables
     Percentage of
Total Number of
Receivables(2)
    Aggregate
Outstanding
Principal Balance
     Percentage of Total
Aggregate
Outstanding
Principal Balance(2)
 

Texas

     10,358         15.51   $ 208,217,559.96         17.01

Florida

     9,324         13.96        163,924,807.41         13.39   

California

     5,896         8.83        106,548,680.90         8.70   

Georgia

     3,789         5.67        73,298,182.79         5.99   

New York

     2,644         3.96        52,892,243.01         4.32   

Illinois

     2,818         4.22        49,054,304.80         4.01   

North Carolina

     2,710         4.06        49,050,835.52         4.01   

Louisiana

     1,739         2.60        33,561,660.35         2.74   

South Carolina

     1,746         2.61        31,313,763.45         2.56   

Ohio

     1,992         2.98        30,755,157.75         2.51   

Tennessee

     1,600         2.40        29,028,999.28         2.37   

New Jersey

     1,603         2.40        28,066,333.15         2.29   

Alabama

     1,528         2.29        27,754,972.28         2.27   

Arkansas

     1,361         2.04        25,914,613.56         2.12   

Arizona

     1,394         2.09        25,887,857.13         2.11   

Maryland

     1,306         1.96        23,814,658.62         1.95   

Mississippi

     1,235         1.85        22,995,970.31         1.88   

Missouri

     1,178         1.76        20,012,448.39         1.63   

Virginia

     1,099         1.65        19,772,931.16         1.62   

Oklahoma

     1,075         1.61        19,668,849.55         1.61   

Michigan

     1,113         1.67        18,517,388.39         1.51   

Kentucky

     964         1.44        16,431,213.75         1.34   

Indiana

     979         1.47        16,056,145.57         1.31   

Nevada

     815         1.22        15,117,222.51         1.24   

Connecticut

     729         1.09        12,256,541.55         1.00   

Other(3)

     5,802         8.69        104,101,786.15         8.50   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  Based on the state of residence of the obligor on the receivables. The state of residence of the obligor may differ from the asset-level data included as an Exhibit to Form ABS-EE due to differences in how the state of residence is populated for the securitized pool and how state of residence is required to be populated asset-level data.
(2)  Sum of percentages may not equal 100% due to rounding.
(3)  “Other” represents those obligors whose state of residence comprises less than 1.00% of the aggregate outstanding principal balance of the receivables.

 

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Table of Contents

Distribution of the Pool of Receivables

By Model Year

As of the Cut-off Date

 

Model Year

   Number of
Receivables
     Percentage of
Total Number of
Receivables(1)
    Aggregate Outstanding
Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal  Balance(1)
 

2002

     20         0.03   $ 147,479.00         0.01

2003

     54         0.08        464,528.93         0.04   

2004

     115         0.17        941,819.85         0.08   

2005

     401         0.60        3,300,420.19         0.27   

2006

     779         1.17        6,795,681.85         0.56   

2007

     1,696         2.54        16,890,551.41         1.38   

2008

     2,767         4.14        29,873,750.39         2.44   

2009

     2,394         3.58        26,897,560.12         2.20   

2010

     3,639         5.45        43,705,829.68         3.57   

2011

     4,671         6.99        65,624,629.51         5.36   

2012

     6,187         9.26        89,761,516.76         7.33   

2013

     8,194         12.27        139,998,673.17         11.44   

2014

     10,253         15.35        194,781,404.25         15.91   

2015

     7,523         11.26        139,380,414.06         11.39   

2016

     11,552         17.29        294,155,811.42         24.03   

2017

     6,552         9.81        171,295,056.70         13.99   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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

Distribution of the Pool of Receivables

By Original Term to Maturity

As of the Cut-off Date

 

Original

Term to Maturity

(Number of Months)(1)

   Number of
Receivables
     Percentage of
Total Number of
Receivables(2)
    Aggregate
Outstanding

Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal  Balance(2)
 

24 and less

     81         0.12   $ 568,532.66         0.05

25 – 36

     462         0.69        3,804,669.35         0.31   

37 – 48

     2,132         3.19        20,212,684.15         1.65   

49 – 60

     5,900         8.83        70,019,937.66         5.72   

61 – 72

     52,873         79.15        979,223,175.06         80.00   

73 – 75

     5,349         8.01        150,186,128.41         12.27   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  The original term to maturity of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how the original term to maturity is calculated for the securitized pool and how original term to maturity is required to be calculated for asset-level data.
(2)  Sum of percentages may not equal 100% due to rounding.

 

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Table of Contents

Distribution of the Pool of Receivables

By Remaining Term to Maturity

As of the Cut-off Date

 

Remaining

Term to Maturity

(Number of Months) (1)

   Number of
Receivables
     Percentage of
Total Number of
Receivables(2)
    Aggregate Outstanding
Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal  Balance(2)
 

1 – 6

     202         0.30   $ 525,973.92         0.04

7 – 12

     494         0.74        2,438,786.74         0.20   

13 – 18

     2,356         3.53        14,816,470.90         1.21   

19 – 24

     1,728         2.59        17,764,129.59         1.45   

25 – 30

     1,083         1.62        11,400,719.08         0.93   

31 – 36

     2,494         3.73        30,175,286.88         2.47   

37 – 42

     3,790         5.67        55,931,274.32         4.57   

43 – 48

     4,452         6.66        67,589,856.19         5.52   

49 – 54

     955         1.43        16,806,703.03         1.37   

55 – 60

     5,836         8.74        81,409,513.01         6.65   

61 – 66

     1,964         2.94        36,979,195.11         3.02   

67 – 72

     38,189         57.17        784,700,897.82         64.11   

73 – 75

     3,254         4.87        103,476,320.70         8.45   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  The remaining term to maturity of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how the remaining term to maturity is calculated for the securitized pool and how remaining term to maturity is required to be calculated for asset-level data.
(2)  Sum of percentages may not equal 100% due to rounding.

 

54


Table of Contents

Distribution of the Pool of Receivables

By Original Amount Financed

As of the Cut-off Date

 

Original Amount

Financed

   Number of
Receivables
     Percentage of
Total Number
of Receivables(1)
    Aggregate Outstanding
Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal Balance(1)
 

$2,500.01 - $5,000.00

     51         0.08   $ 225,355.56         0.02

$5,000.01 - $7,500.00

     1,541         2.31        9,304,482.79         0.76   

$7,500.01 - $10,000.00

     4,004         5.99        33,177,740.38         2.71   

$10,000.01 - $12,500.00

     7,087         10.61        74,096,404.21         6.05   

$12,500.01 - $15,000.00

     9,127         13.66        113,220,174.97         9.25   

$15,000.01 - $17,500.00

     8,839         13.23        127,843,599.67         10.44   

$17,500.01 - $20,000.00

     7,415         11.10        123,238,141.36         10.07   

$20,000.01 - $22,500.00

     6,543         9.80        124,165,340.72         10.14   

$22,500.01 - $25,000.00

     5,403         8.09        114,397,071.40         9.35   

$25,000.01 - $27,500.00

     4,516         6.76        105,947,864.58         8.66   

$27,500.01 - $30,000.00

     3,404         5.10        88,001,122.92         7.19   

$30,000.01 - $32,500.00

     2,353         3.52        67,291,483.09         5.50   

$32,500.01 - $35,000.00

     1,706         2.55        53,546,457.55         4.37   

$35,000.01 - $37,500.00

     1,396         2.09        47,150,889.36         3.85   

$37,500.01 - $40,000.00

     1,156         1.73        42,815,209.86         3.50   

$40,000.01 - $42,500.00

     768         1.15        30,545,431.05         2.50   

$42,500.01 - $45,000.00

     570         0.85        24,051,295.24         1.96   

$45,000.01 - $47,500.00

     309         0.46        13,834,635.10         1.13   

$47,500.01 - $50,000.00

     234         0.35        11,163,842.61         0.91   

$50,000.01 and greater

     375         0.56        19,998,584.87         1.63   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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

 

55


Table of Contents

Distribution of the Pool of Receivables

By Current Principal Balance

As of the Cut-off Date

 

Current Principal

Balance

   Number of
Receivables
     Percentage of
Total Number
of Receivables(1)
    Aggregate
Outstanding

Principal Balance
     Percentage of Total
Aggregate
Outstanding
Principal Balance(1)
 

$0.01 - $5,000.00

     1,544         2.31   $ 5,621,307.23         0.46

$5,000.01 - $10,000.00

     9,254         13.85        73,507,562.81         6.01   

$10,000.01 - $15,000.00

     17,715         26.52        223,068,671.23         18.22   

$15,000.01 - $20,000.00

     14,882         22.28        257,837,153.13         21.06   

$20,000.01 - $25,000.00

     9,849         14.74        219,528,757.21         17.94   

$25,000.01 - $30,000.00

     6,110         9.15        166,642,311.29         13.61   

$30,000.01 - $35,000.00

     3,261         4.88        105,269,293.36         8.60   

$35,000.01 - $40,000.00

     2,177         3.26        81,347,093.75         6.65   

$40,000.01 - $45,000.00

     1,196         1.79        50,552,987.66         4.13   

$45,000.01 - $50,000.00

     490         0.73        23,179,779.19         1.89   

$50,000.01 and greater

     319         0.48        17,460,210.43         1.43   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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

Distribution of the Pool of Receivables

By Vehicle Make

As of the Cut-off Date

 

Vehicle Make

   Number of
Receivables
     Percentage of
Total Number of
Receivables(1)
    Aggregate
Outstanding

Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal  Balance(1)
 

Dodge

     9,875         14.78   $ 227,941,731.65         18.62

Chevrolet

     7,949         11.90        140,533,340.54         11.48   

Nissan

     8,286         12.40        134,995,421.11         11.03   

Jeep

     5,099         7.63        114,348,246.40         9.34   

Ford

     6,301         9.43        112,023,552.03         9.15   

Toyota

     5,337         7.99        93,107,254.66         7.61   

Kia

     3,783         5.66        59,144,091.22         4.83   

Chrysler

     3,097         4.64        55,881,782.22         4.57   

Hyundai

     3,710         5.55        52,603,969.72         4.30   

Honda

     2,773         4.15        42,305,766.62         3.46   

GMC

     1,093         1.64        26,521,414.68         2.17   

Mercedes-Benz

     860         1.29        20,522,119.65         1.68   

Volkswagen

     1,213         1.82        16,906,611.23         1.38   

BMW

     700         1.05        14,493,461.95         1.18   

Cadillac

     649         0.97        13,392,236.97         1.09   

Mitsubishi

     855         1.28        12,865,991.96         1.05   

Other(2)

     5,217         7.81        86,428,134.68         7.06   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  Sum of percentages may not equal 100% due to rounding.
(2)  “Other” represents other vehicle makes which individually comprise less than 1.00% of the aggregate outstanding principal balance of the receivables.

 

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Distribution of the Pool of Receivables

By Original Mileage

As of the Cut-off Date

 

Original Mileage

   Number of
Receivables
     Percentage of
Total Number
of Receivables(1)
    Aggregate
Outstanding

Principal Balance
     Percentage of Total
Aggregate
Outstanding

Principal  Balance(1)
 

1 - 5,000

     20,237         30.30   $ 491,419,007.30         40.15

5,001 - 10,000

     1,242         1.86        25,360,633.57         2.07   

10,001 - 15,000

     1,873         2.80        36,712,703.00         3.00   

15,001 - 20,000

     2,549         3.82        48,442,915.22         3.96   

20,001 - 25,000

     3,054         4.57        56,996,788.94         4.66   

25,001 - 30,000

     3,473         5.20        62,001,037.30         5.07   

30,001 - 35,000

     4,112         6.16        68,476,117.10         5.59   

35,001 - 40,000

     4,800         7.19        75,037,932.83         6.13   

40,001 - 45,000

     4,334         6.49        67,355,130.01         5.50   

45,001 - 50,000

     3,226         4.83        49,439,514.48         4.04   

50,001 - 55,000

     2,776         4.16        40,858,006.35         3.34   

55,001 - 60,000

     2,603         3.90        38,391,772.30         3.14   

60,001 - 65,000

     2,092         3.13        29,995,118.83         2.45   

65,001 - 70,000

     2,025         3.03        27,427,826.94         2.24   

70,001 - 75,000

     1,855         2.78        25,242,118.10         2.06   

75,001 - 80,000

     1,753         2.62        23,931,452.44         1.96   

80,001 - 85,000

     1,431         2.14        18,244,047.61         1.49   

85,001 - 90,000

     1,269         1.90        15,840,236.30         1.29   

90,001 - 95,000

     777         1.16        8,961,885.42         0.73   

95,001 and greater

     1,316         1.97        13,880,883.25         1.13   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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

Delinquencies, Repossessions and Credit Losses

The following tables provide information relating to delinquency, repossession and credit loss experience for each period indicated with respect to (i) auto receivables originated by SC and (ii) certain auto receivables owned and serviced by SC that, in each case, were classified by SC in its “sub-prime” category. SC’s classification of receivables in the “sub-prime” category of receivables is based on a number of factors and changes from time to time. As a result, there can be no assurance that the delinquency, repossession and credit loss experience with respect to the receivables in the receivables pool will correspond to the delinquency, repossession and credit loss experience of the receivables servicing portfolio set forth in the following tables.

The information in the following tables includes the experience with respect to receivables originated by certain unaffiliated third parties, but the tables do not reflect delinquency, repossession and credit loss experience with respect to those third-party-originated receivables prior to the respective dates on which those receivables were converted to SC’s servicing system. The following statistics include receivables with a variety of payment and other characteristics that may not correspond to the receivables in the receivables pool. As a result, there can be no assurance that the delinquency, repossession and credit loss experience with respect to the receivables in the receivables pool will correspond to the delinquency, repossession and credit loss experience of the receivables servicing portfolio set forth in the following tables.

 

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Delinquency Experience

 

     As of September 30,  
     2016     2015  
     Dollars      Percent     Dollars      Percent  

Principal Amount of Receivables Outstanding

   $ 25,686,968,854         $ 26,715,819,747      

Delinquencies(1)(2)

          

31-60 days

   $ 2,585,787,563         10.07   $ 2,416,832,090         9.05

61-90 days

   $ 1,012,620,683         3.94   $ 889,420,266         3.33

91 days & over

   $ 416,789,406         1.62   $ 378,425,479         1.42

Total 31+ Delinquencies(3)

   $ 4,015,197,652         15.63   $ 3,684,677,835         13.79

Total 61+ Delinquencies(3)

   $ 1,429,410,089         5.56   $ 1,267,845,745         4.75
     As of December 31,  
     2015     2014  
     Dollars      Percent     Dollars      Percent  

Principal Amount of Receivables Outstanding

   $ 26,497,949,863         $ 22,861,655,852      

Delinquencies(1)(2)

          

31-60 days

   $ 2,650,439,407         10.00   $ 2,413,160,130         10.56

61-90 days

   $ 1,014,403,332         3.83   $ 850,284,730         3.72

91 days & over

   $ 418,361,361         1.58   $ 342,225,456         1.50

Total 31+ Delinquencies(3)

   $ 4,083,204,100         15.41   $ 3,605,670,317         15.77

Total 61+ Delinquencies(3)

   $ 1,432,764,693         5.41   $ 1,192,510,186         5.22

 

     As of December 31,  
     2013     2012     2011  
     Dollars      Percent     Dollars      Percent     Dollars      Percent  

Principal Amount of Receivables Outstanding

   $ 21,128,192,038         $ 16,206,447,480         $ 14,139,464,691      

Delinquencies(1)(2)

               

31-60 days

   $ 2,019,321,898         9.56   $ 1,493,648,233         9.22   $ 1,256,736,342         8.89

61-90 days

   $ 782,658,724         3.70   $ 528,634,635         3.26   $ 451,889,107         3.20

91 days & over

   $ 332,985,935         1.58   $ 212,451,930         1.31   $ 198,334,653         1.40

Total 31+ Delinquencies(3)

   $ 3,134,966,558         14.84   $ 2,234,734,798         13.79   $ 1,906,960,101         13.49

Total 61+ Delinquencies(3)

   $ 1,115,644,659         5.28   $ 741,086,565         4.57   $ 650,223,760         4.60

 

(1)  The servicer considers a receivable delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date, as determined in accordance with SC’s customary servicing practices. With respect to receivables originated by the servicer prior to January 1, 2017 and through its “Chrysler Capital” channel, the required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator prior to January 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel the receivable was originated through. In each case, the period of delinquency is based on the number of days payments are contractually past due.
(2)  Delinquencies include bankruptcies and repossessions.
(3)  The sum of the delinquencies may not equal the Total 31+ Delinquencies and Total 61+ Delinquencies due to rounding.

 

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Credit Loss Experience

 

     For the nine months ended September 30,     For the year ended December 31,  
     2016     2015     2015     2014  

Principal Outstanding at Period End

   $ 25,686,968,854      $ 26,715,819,747      $ 26,497,949,863      $ 22,861,655,852   

Average Principal Outstanding During the Period

   $ 26,250,452,166      $ 25,106,402,525      $ 25,458,571,492      $ 22,498,585,884   

Number of Receivables Outstanding at Period End

     1,665,202        1,706,674        1,692,896        1,520,903   

Average Number of Receivables Outstanding During the Period

     1,689,698        1,629,048        1,645,636        1,536,505   

Number of Repossessions(1)

     206,432        151,204        213,946        192,117   

Number of Repossessions as a Percent of Average Number of Receivables Outstanding(2)

     16.29     12.38     13.00     12.50

Net Losses(3)

   $ 1,746,775,624      $ 1,272,358,617      $ 1,973,248,507      $ 1,662,659,655   

Net Losses as a Percent of Average Principal Amount Outstanding(2)

     8.87     6.76     7.75     7.39

 

     For the year ended December 31,  
     2013     2012     2011  

Principal Outstanding at Period End

   $ 21,128,192,038      $ 16,206,447,480      $ 14,139,464,691   

Average Principal Outstanding During the Period

   $ 18,917,625,114      $ 15,124,164,077      $ 14,325,311,588   

Number of Receivables Outstanding at Period End

     1,523,138        1,249,933        1,211,424   

Average Number of Receivables Outstanding During the Period

     1,367,800        1,225,721        1,236,601   

Number of Repossessions(1)

     138,713        120,114        118,563   

Number of Repossessions as a Percent of Average Number of Receivables Outstanding

     10.14     9.80     9.59

Net Losses(3)

   $ 1,099,318,995      $ 689,179,559      $ 832,605,312   

Net Losses as a Percent of Average Principal Amount Outstanding

     5.81     4.56     5.81

 

(1)  Repossessions are net of redemptions. The number of repossessions includes repossessions from the outstanding portfolio and from accounts already charged-off.
(2)  The percentages for the nine months ended September 30, 2015 and September 30, 2016 are annualized and are not necessarily indicative of a full year’s actual results.
(3)  “Net Losses” for any period are an amount equal to (i) the aggregate principal balance of receivables that became defaulted receivables plus all cram down losses minus (ii) insurance proceeds, sales proceeds and recoveries, net of auction, painting, repair and refurbishment expenses (but without taking into account any external costs associated with repossession expenses).

In addition to the payment and other characteristics of a pool of receivables, delinquencies, repossessions and credit losses are also affected by a number of social and economic factors, including changes in interest rates and unemployment levels, and there can be no assurance as to the level of future total delinquencies or the severity of future credit losses as a result of these factors. Accordingly, the delinquency, repossession and credit loss experience of the receivables may differ from those shown in the foregoing tables.

See “The Transfer Agreements and the Administration Agreement” in this prospectus for additional information regarding the servicer.

Delinquency Experience Regarding the Pool of Receivables

The following table sets forth the delinquency experience regarding the pool of receivables. The servicer considers a receivable delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date, as determined in accordance with SC’s customary servicing practices. With respect to receivables originated by the servicer prior to January 1, 2017 and through its “Chrysler Capital” channel, the

 

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required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator prior to January 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator on or after January 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel the receivable was originated through. In each case, the period of delinquency is based on the number of days payments are contractually past due. As of the cut-off date, none of the receivables in the pool were delinquent by more than 30 days.

 

Historical Delinquency Status

   Number of
Receivables
     Percentage of
Total Number
of
Receivables(2)
    Aggregate Outstanding
Principal Balance
     Percentage of
Total Aggregate
Outstanding
Principal
Balance(2)
 

Delinquent no more than once for 30-59 days(1)

     58,864         88.12   $ 1,105,391,923.83         90.31

Delinquent more than once for 30-59 days but never for 60 days or more

     3,526         5.28        51,791,724.01         4.23   

Delinquent at least once for 60 days or more

     4,407         6.60        66,831,479.45         5.46   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     66,797         100.00   $ 1,224,015,127.29         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  Delinquent no more than once for 30-59 days represent accounts that were never delinquent or were delinquent one time but never exceeded 59 days past due.
(2)  Sum of percentages may not equal 100% due to rounding.

Information About Certain Previous Securitizations

Appendix A to this prospectus (“Appendix A”) sets forth in tabular and graphical format static pool information regarding delinquencies, cumulative losses and prepayments for publicly securitized pools of receivables originated or acquired by SC, securitized through the “SDART” securitization platform and having a first payment date occurring before December 31, 2016. Appendix A does not include information regarding securitized pools of receivables originated by any unaffiliated third-party originator from whom SC acquired receivables, although Appendix A does include information regarding securitizations sponsored by SC which include receivables originated by those unaffiliated third-party originators. This static pool information is presented for the securitized pool in each public prior securitization sponsored by SC through the “SDART” securitization platform during at least the last five years. The term “securitized pool” refers to the securitized pool of receivables as of the related cut-off date.

Appendix A includes the following summary information for each of the securitized pools:

 

    number of pool assets;

 

    original pool balance;

 

    average initial loan balance;

 

    weighted average interest rate;

 

    weighted average original term;

 

    weighted average remaining term;

 

    minimum credit bureau score, maximum credit bureau score and weighted average credit bureau score;

 

    product type (new/used);

 

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    distribution of receivables by interest rate, vehicle make, model year, original term, remaining term, amount financed, current principal balance and original mileage;

 

    geographic distribution of receivables; and

 

    weighted average loan-to-value ratio.

The foregoing characteristics for the pool of receivables to be acquired by the issuing entity on the closing date will not be identical to the characteristics of any prior securitized pool, and the characteristics of each prior securitized pool vary from securitization to securitization. SC’s practice is to select a securitized pool from substantially all available eligible assets in its portfolio using selection procedures that were not known or intended by SC to be adverse to the applicable issuing entity. However, the composition of the assets in the SC portfolio designated for the “SDART” securitization transactions has changed over time. This is because SC’s portfolio of retail installment sale contracts, from which the securitized pools are selected, changes over time. Despite these differences as identified in the summary information for the prior securitized pools, the prior securitized pools are generally comparable to the receivables in this securitization transaction, because SC’s origination, underwriting and purchasing policies and servicing policies have been generally consistent over time.

Based on SC’s experience, the characteristics that are expected to most significantly influence the performance of a securitized pool of retail installment sale contracts are the FICO® scores, new/used percentages, loan-to-value ratios and whether the pool includes contracts with original terms greater than 60 months. A securitized pool with lower FICO® scores, higher loan-to-values and a higher percentage of longer term contracts may not perform as well as a securitized pool with higher FICO® scores, lower loan-to-values and/or a lower percentage of longer term contracts. Securitized pools generally will perform better during periods of economic growth than during periods of economic downturn or stagnant growth.

The pool of receivables to be acquired by the issuing entity on the closing date is expected to have substantially similar FICO® scores and loan-to-value ratios compared to most of the prior receivables securitization transactions set forth on Appendix A and a higher percentage of used vehicles and longer term contracts compared to some of the prior receivables securitization transactions set forth on Appendix A. Any difference in performance in the pool of receivables compared to prior securitized pools may be more influenced by general macroeconomic conditions than differences in these characteristics.

In addition, although the selection criteria used for the retail installment sale contracts in the prior securitized pools have changed over time, these changes do not diminish the general comparability of the prior securitized pools to the pool of receivables in this securitization transaction. Losses, prepayments and delinquencies for the pool of receivables in this securitization transaction may nonetheless differ from the information shown in Appendix A for prior securitized pools.

As a result of each of the foregoing, there can be no assurance that the performance of the prior receivables securitization transactions sponsored by SC will correspond to or be an accurate predictor of the performance of this receivables securitization transaction. We encourage investors to compare the summary characteristics of the pool of receivables to the summary characteristics of each securitized pool set forth on Appendix A prior to making an investment decision. Additionally, to further understand how differing pool characteristics could impact performance, see “Risk Factors—Credit scores, loss forecasting scores and historical loss experience may not accurately predict the likelihood of delinquencies, defaults and losses on the receivables”, “Risk Factors—The rate of depreciation of certain financed vehicles could exceed the amortization of the outstanding principal amount of the related receivables, which may result in losses”, “Risk Factors—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” and “Risk Factors—The return on your notes may be reduced due to varying economic circumstances and/or an economic downturn”.

Review of Pool Assets

In connection with the offering of the notes, the depositor has performed a review of the receivables in the pool and the disclosure regarding the receivables required to be included in this prospectus by Item 1111 of

 

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Regulation AB (such disclosure, the “Rule 193 Information”). This review was designed and effected to provide the depositor with reasonable assurance that the Rule 193 Information is accurate in all material respects.

As part of the review, SC identified the Rule 193 Information to be covered and identified the review procedures for each portion of the Rule 193 Information. Descriptions consisting of factual information were reviewed and approved by SC senior management to ensure the accuracy of such descriptions. SC also reviewed the Rule 193 Information consisting of descriptions of portions of the transaction documents and compared that Rule 193 Information to the related transaction documents to ensure the descriptions were accurate. SC officers also consulted with internal regulatory personnel and counsel, as well as external counsel, with respect to the description of the legal and regulatory provisions that may materially and adversely affect the performance of the receivables or payments on the notes.

In addition, SC employees performed a review of the Rule 193 Information to confirm that the receivables in the pool satisfied the criteria set forth in the second paragraph under “The Receivables Pool—Characteristics of the Receivables” in this prospectus. Statistical information relating to the receivables was recalculated using data tapes containing information from SC’s information systems, which includes databases containing certain attributes of the receivables, as well as originations data. The review of Rule 193 Information relating to credit approvals and exceptions to credit policies consisted of the application of SC’s internal control procedures, which include regular quality assurance and information technology internal audits on origination, funding and data systems to ensure accuracy of data and that previously originated receivables complied with underwriting guidelines. In addition, 150 receivable files relating to the initial receivables were randomly selected in order to compare certain receivable characteristics selected by the depositor to the applicable information on the data tapes.

Portions of the review of legal matters and the review of statistical information were performed with the assistance of third parties engaged by the depositor. The depositor determined the nature, extent and timing of the review and the level of assistance provided by the third parties. The depositor had ultimate authority and control over, and assumes all responsibility for, the review and the findings and conclusions of the review. The depositor attributes all findings and conclusions of the review to itself.

After undertaking the review described above, the depositor has found and concluded that it has reasonable assurance that the Rule 193 Information in this prospectus is accurate in all material respects.

Repurchases and Replacements

No assets securitized by SC were the subject of a demand to repurchase or replace for breach of the representations and warranties during the three-year period ending December 31, 2016.

Please refer to the Form ABS-15G filed by SC on January 27, 2017 for additional information. The CIK number of SC is 0001540151.

MATURITY AND PREPAYMENT CONSIDERATIONS

The weighted average life of the notes will generally be influenced by the rate at which the principal balances of the receivables are paid, which payments may be in the form of scheduled payments or prepayments. Each receivable is prepayable in full by the obligor at any time. Full and partial prepayments on motor vehicle receivables included in the issuing entity property will be paid or distributed to the related noteholders on the next payment date following the Collection Period in which they are received. To the extent that any receivable included in the issuing entity property is prepaid in full, whether by the obligor, or as the result of a purchase by the servicer or a repurchase by SC or otherwise, the actual weighted average life of the receivables included in the issuing entity property will be shorter than a weighted average life calculation based on the assumptions that payments will be made on schedule and that no prepayments will be made. Weighted average life means the average amount of time until the entire principal amount of a receivable is repaid. Full prepayments may also result from liquidations due to default, receipt of proceeds from theft, physical damage, credit life and credit disability insurance policies or purchases made by the servicer as a result of a breach of a covenant made by it related to its servicing duties as described under “The Transfer Agreements and the Administration Agreement—Collection, Extensions and Modifications of Receivables.” In addition, early retirement of the notes may be effected at the option of the servicer, to purchase the remaining receivables included in the issuing entity property when the outstanding balance

 

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of the receivables has declined to or below the percentage specified in “The Transfer Agreements and the Administration Agreement—Optional Redemption” in this prospectus.

The rate of full prepayments by obligors on the receivables may be influenced by a variety of economic, social and other factors. These factors include the unemployment rate, servicing decisions, seasoning of loans, destruction of vehicles by accident, loss of vehicles due to theft, sales of vehicles, market interest rates, the availability of alternative financing and restrictions on the obligor’s ability to sell or transfer the financed vehicle securing a receivable without the consent of the servicer. Any full prepayments or partial prepayments applied immediately will reduce the average life of the receivables.

SC can make no prediction as to the actual prepayment rates that will be experienced on the receivables included in the issuing entity property in either stable or changing interest rate environments. Noteholders will bear all reinvestment risk resulting from the rate of prepayment of the receivables included in the issuing entity property.

The following information is provided solely to illustrate the effect of prepayments of the receivables on the unpaid principal balances of the notes and the weighted average life of the notes under the assumptions stated below and is not a prediction of the prepayment rates that might actually be experienced with respect to the receivables.

Prepayments on receivables can be measured against prepayment standards or models. The absolute prepayment model, or “ABS,” assumes a rate of prepayment each month which is related to the original number of receivables in a pool of receivables. ABS also assumes that all of the receivables in a pool are the same size, that all of those receivables amortize at the same rate and that for every month that any individual receivable is outstanding, payments on that particular receivable will either be made as scheduled or the receivable will be prepaid in full. For example, in a pool of receivables originally containing 10,000 receivables, if a 1% ABS were used, that would mean that 100 receivables would prepay in full each month. The percentage of prepayments that is assumed for ABS is not a historical description of prepayment experience on pools of receivables or a prediction of the anticipated rate of prepayment on either the pool of receivables involved in this transaction or on any pool of receivables. You should not assume that the actual rate of prepayments on the receivables will be in any way related to the percentage of prepayments that was assumed for ABS.

The tables below which are captioned “Percent of the Initial Note Balance at Various ABS Percentages” (the “ABS Tables”) are based on ABS and were prepared using the following assumptions:

 

    the issuing entity holds 7 pools of receivables with the following characteristics:

 

Pool

   Aggregate
Outstanding
Principal Balance
     Gross
Contract
Rate
   

Assumed

Cut-off Date

   Original
Term to
Maturity
(in Months)
     Remaining
Term to
Maturity (in
Months)
 

1

   $ 2,964,760.66         17.572   January 31, 2017      63         9   

2

   $ 32,580,600.49         17.417   January 31, 2017      69         19   

3

   $ 41,576,005.96         17.654   January 31, 2017      66         32   

4

   $ 123,521,130.51         17.130   January 31, 2017      69         43   

5

   $ 98,216,216.04         17.031   January 31, 2017      65         57   

6

   $ 821,680,092.93         15.357   January 31, 2017      72         71   

7

   $ 103,476,320.70         12.945   January 31, 2017      75         74   
  

 

 

            

Total

   $ 1,224,015,127.29              
  

 

 

            

 

    all prepayments on the receivables each month are made in full on the last day of each month (and include 30 days of interest) at the specified constant percentage of ABS commencing in February 2017 and there are no defaults, losses or repurchases;

 

    interest accrues on the notes at the following per annum coupon rates: Class A-1 notes, 0.90000%; Class A-2 notes, 1.73%; Class A-3 notes, 2.02%; Class B notes, 2.52%; Class C notes 3.01%; Class D notes, 3.40%; and Class E notes, 5.49%;

 

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    each scheduled payment on the receivables is made on the last day of each month commencing in February 2017, and each month has 30 days;

 

    the initial Note Balance of each class of notes is equal to the initial principal balance set forth with respect to such class in the column titled “Principal Balance” on the front cover of this prospectus;

 

    payments on the notes are paid in cash on each payment date commencing March 15, 2017 and on the 15th calendar day of each subsequent month whether or not that day is a Business Day;

 

    the notes are purchased on the closing date of February 28, 2017;

 

    the servicing fee will be 3.00% per annum, the indenture trustee fee, asset representations reviewer fee and owner trustee fee, in the aggregate, equal $16,666.67 monthly, and all other fees and expenses equal zero;

 

    the Class A-1 notes will be paid interest on the basis of the actual number of days elapsed during the period for which interest is payable and a 360-day year;

 

    the Class A-2 notes, the Class A-3 notes, the Class B notes, the Class C notes, the Class D notes and the Class E notes will be paid interest on the basis of a 360-day year consisting of twelve 30-day months;

 

    Available Funds from the contracts described above are distributed in accordance with the payment priorities described below under “The Transfer Agreements and the Administration Agreement—Priority of Payments,” and no event of default under the indenture occurs;

 

    payments of principal on the notes are distributed in accordance with the payment priorities described below under “The Notes—Payments of Principal”;

 

    the scheduled payment for each receivable was calculated on the basis of the characteristics described in the ABS Tables and in such a way that each receivable would amortize in a manner that will be sufficient to repay the receivable balance of that receivable by its indicated remaining term to maturity;

 

    except as indicated in the tables, the “clean-up call” option to redeem the notes will be exercised at the earliest opportunity; and

 

    investment income amounts equal zero.

The ABS Tables were created relying on the assumptions listed above. The tables indicate the percentages of the initial Note Balance of each class of notes that would be outstanding after each of the listed payment dates if certain percentages of ABS are assumed. The ABS Tables also indicate the corresponding weighted average lives of each class of notes if the same percentages of ABS are assumed. The assumptions used to construct the ABS Tables are hypothetical and have been provided only to give a general sense of how the principal cash flows might behave under various prepayment scenarios. The actual characteristics and performance of the receivables may differ materially from the assumptions used to construct the ABS Tables.

As used in the ABS Tables, the “weighted average life” of a class of notes is determined by:

 

    multiplying the amount of each principal payment on a note by the number of years from the date of the issuance of the note to the related payment date;

 

    adding the results; and

 

    dividing the sum by the related initial Note Balance of the note.

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class A-1 Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     85.02     83.37     79.77     75.30     54.46     23.18

April 15, 2017

     70.59     67.34     60.29     51.57     28.46     0.00

May 15, 2017

     56.18     51.40     41.03     28.29     2.94     0.00

June 15, 2017

     41.80     35.54     22.00     7.28     0.00     0.00

July 15, 2017

     30.63     24.06     9.84     0.00     0.00     0.00

August 15, 2017

     22.92     15.14     0.00     0.00     0.00     0.00

September 15, 2017

     15.15     6.20     0.00     0.00     0.00     0.00

October 15, 2017

     7.33     0.00     0.00     0.00     0.00     0.00

November 15, 2017

     0.00     0.00     0.00     0.00     0.00     0.00

Weighted Average Life (Years) to Call

     0.32        0.28        0.22        0.18        0.11        0.06   

Weighted Average Life (Years) to Maturity

     0.32        0.28        0.22        0.18        0.11        0.06   

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class A-2 Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2017

     100.00     100.00     100.00     100.00     100.00     92.45

May 15, 2017

     100.00     100.00     100.00     100.00     100.00     73.95

June 15, 2017

     100.00     100.00     100.00     100.00     89.68     58.53

July 15, 2017

     100.00     100.00     100.00     95.34     79.18     43.40

August 15, 2017

     100.00     100.00     98.97     86.28     68.84     28.58

September 15, 2017

     100.00     100.00     91.83     77.36     58.65     14.07

October 15, 2017

     100.00     98.28     84.74     68.60     48.63     2.48

November 15, 2017

     99.66     92.68     77.71     60.00     38.79     0.00

December 15, 2017

     94.79     87.15     70.80     51.59     29.11     0.00

January 15, 2018

     89.89     81.62     63.95     43.32     19.61     0.00

February 15, 2018

     84.96     76.08     57.16     35.21     10.29     0.00

March 15, 2018

     79.99     70.54     50.42     27.26     1.15     0.00

April 15, 2018

     74.99     64.99     43.75     19.47     0.00     0.00

May 15, 2018

     69.95     59.43     37.13     11.85     0.00     0.00

June 15, 2018

     64.88     53.86     30.57     4.39     0.00     0.00

July 15, 2018

     59.78     48.29     24.08     0.00     0.00     0.00

August 15, 2018

     54.64     42.71     17.65     0.00     0.00     0.00

September 15, 2018

     49.46     37.13     11.29     0.00     0.00     0.00

October 15, 2018

     44.76     32.01     5.31     0.00     0.00     0.00

November 15, 2018

     40.02     26.88     0.00     0.00     0.00     0.00

December 15, 2018

     35.25     21.75     0.00     0.00     0.00     0.00

January 15, 2019

     30.45     16.61     0.00     0.00     0.00     0.00

February 15, 2019

     25.62     11.46     0.00     0.00     0.00     0.00

March 15, 2019

     20.75     6.32     0.00     0.00     0.00     0.00

April 15, 2019

     15.85     1.17     0.00     0.00     0.00     0.00

May 15, 2019

     10.92     0.00     0.00     0.00     0.00     0.00

June 15, 2019

     5.95     0.00     0.00     0.00     0.00     0.00

July 15, 2019

     0.95     0.00     0.00     0.00     0.00     0.00

August 15, 2019

     0.00     0.00     0.00     0.00     0.00     0.00

Weighted Average Life (Years) to Call

     1.59        1.40        1.10        0.86        0.66        0.39   

Weighted Average Life (Years) to Maturity

     1.59        1.40        1.10        0.86        0.66        0.39   

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class A-3 Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

May 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

June 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

July 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

August 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

September 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

October 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

November 15, 2017

     100.00     100.00     100.00     100.00     100.00     78.85

December 15, 2017

     100.00     100.00     100.00     100.00     100.00     51.22

January 15, 2018

     100.00     100.00     100.00     100.00     100.00     24.03

February 15, 2018

     100.00     100.00     100.00     100.00     100.00     0.00

March 15, 2018

     100.00     100.00     100.00     100.00     100.00     0.00

April 15, 2018

     100.00     100.00     100.00     100.00     78.35     0.00

May 15, 2018

     100.00     100.00     100.00     100.00     54.04     0.00

June 15, 2018

     100.00     100.00     100.00     100.00     30.28     0.00

July 15, 2018

     100.00     100.00     100.00     92.04     8.10     0.00

August 15, 2018

     100.00     100.00     100.00     72.38     0.00     0.00

September 15, 2018

     100.00     100.00     100.00     53.05     0.00     0.00

October 15, 2018

     100.00     100.00     100.00     34.05     0.00     0.00

November 15, 2018

     100.00     100.00     98.31     15.39     0.00     0.00

December 15, 2018

     100.00     100.00     82.03     0.00     0.00     0.00

January 15, 2019

     100.00     100.00     65.90     0.00     0.00     0.00

February 15, 2019

     100.00     100.00     49.92     0.00     0.00     0.00

March 15, 2019

     100.00     100.00     34.11     0.00     0.00     0.00

April 15, 2019

     100.00     100.00     18.47     0.00     0.00     0.00

May 15, 2019

     100.00     88.92     3.00     0.00     0.00     0.00

June 15, 2019

     100.00     74.60     0.00     0.00     0.00     0.00

July 15, 2019

     100.00     60.27     0.00     0.00     0.00     0.00

August 15, 2019

     88.66     45.93     0.00     0.00     0.00     0.00

September 15, 2019

     74.59     31.59     0.00     0.00     0.00     0.00

October 15, 2019

     60.42     17.24     0.00     0.00     0.00     0.00

November 15, 2019

     47.27     3.86     0.00     0.00     0.00     0.00

December 15, 2019

     34.04     0.00     0.00     0.00     0.00     0.00

January 15, 2020

     20.72     0.00     0.00     0.00     0.00     0.00

February 15, 2020

     7.31     0.00     0.00     0.00     0.00     0.00

March 15, 2020

     0.00     0.00     0.00     0.00     0.00     0.00

Weighted Average Life (Years) to Call

     2.74        2.48        2.00        1.60        1.27        0.84   

Weighted Average Life (Years) to Maturity

     2.74        2.48        2.00        1.60        1.27        0.84   

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class B Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

May 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

June 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

July 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

August 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

September 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

October 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

November 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

December 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

January 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

February 15, 2018

     100.00     100.00     100.00     100.00     100.00     97.66

March 15, 2018

     100.00     100.00     100.00     100.00     100.00     75.02

April 15, 2018

     100.00     100.00     100.00     100.00     100.00     52.78

May 15, 2018

     100.00     100.00     100.00     100.00     100.00     30.95

June 15, 2018

     100.00     100.00     100.00     100.00     100.00     9.52

July 15, 2018

     100.00     100.00     100.00     100.00     100.00     0.00

August 15, 2018

     100.00     100.00     100.00     100.00     88.26     0.00

September 15, 2018

     100.00     100.00     100.00     100.00     69.95     0.00

October 15, 2018

     100.00     100.00     100.00     100.00     52.03     0.00

November 15, 2018

     100.00     100.00     100.00     100.00     34.52     0.00

December 15, 2018

     100.00     100.00     100.00     97.48     17.43     0.00

January 15, 2019

     100.00     100.00     100.00     82.03     0.76     0.00

February 15, 2019

     100.00     100.00     100.00     66.89     0.00     0.00

March 15, 2019

     100.00     100.00     100.00     52.08     0.00     0.00

April 15, 2019

     100.00     100.00     100.00     37.58     0.00     0.00

May 15, 2019

     100.00     100.00     100.00     23.43     0.00     0.00

June 15, 2019

     100.00     100.00     89.41     9.62     0.00     0.00

July 15, 2019

     100.00     100.00     76.40     0.00     0.00     0.00

August 15, 2019

     100.00     100.00     63.55     0.00     0.00     0.00

September 15, 2019

     100.00     100.00     50.86     0.00     0.00     0.00

October 15, 2019

     100.00     100.00     38.33     0.00     0.00     0.00

November 15, 2019

     100.00     100.00     26.50     0.00     0.00     0.00

December 15, 2019

     100.00     91.81     14.83     0.00     0.00     0.00

January 15, 2020

     100.00     80.30     3.30     0.00     0.00     0.00

February 15, 2020

     100.00     68.78     0.00     0.00     0.00     0.00

March 15, 2020

     94.67     57.26     0.00     0.00     0.00     0.00

April 15, 2020

     82.97     45.74     0.00     0.00     0.00     0.00

May 15, 2020

     71.19     34.21     0.00     0.00     0.00     0.00

June 15, 2020

     59.33     22.69     0.00     0.00     0.00     0.00

July 15, 2020

     47.39     11.17     0.00     0.00     0.00     0.00

August 15, 2020

     35.37     0.00     0.00     0.00     0.00     0.00

September 15, 2020

     23.26     0.00     0.00     0.00     0.00     0.00

October 15, 2020

     13.28     0.00     0.00     0.00     0.00     0.00

November 15, 2020

     3.24     0.00     0.00     0.00     0.00     0.00

December 15, 2020

     0.00     0.00     0.00     0.00     0.00     0.00

Weighted Average Life (Years) to Call

     3.40        3.13        2.59        2.10        1.68        1.18   

Weighted Average Life (Years) to Maturity

     3.40        3.13        2.59        2.10        1.68        1.18   

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class C Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

May 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

June 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

July 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

August 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

September 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

October 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

November 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

December 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

January 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

February 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

May 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

June 15, 2018

     100.00     100.00     100.00     100.00     100.00     100.00

July 15, 2018

     100.00     100.00     100.00     100.00     100.00     90.49

August 15, 2018

     100.00     100.00     100.00     100.00     100.00     73.45

September 15, 2018

     100.00     100.00     100.00     100.00     100.00     56.78

October 15, 2018

     100.00     100.00     100.00     100.00     100.00     40.47

November 15, 2018

     100.00     100.00     100.00     100.00     100.00     24.54

December 15, 2018

     100.00     100.00     100.00     100.00     100.00     8.99

January 15, 2019

     100.00     100.00     100.00     100.00     100.00     0.00

February 15, 2019

     100.00     100.00     100.00     100.00     87.19     0.00

March 15, 2019

     100.00     100.00     100.00     100.00     75.47     0.00

April 15, 2019

     100.00     100.00     100.00     100.00     63.99     0.00

May 15, 2019

     100.00     100.00     100.00     100.00     52.76     0.00

June 15, 2019

     100.00     100.00     100.00     100.00     41.78     0.00

July 15, 2019

     100.00     100.00     100.00     96.81     31.05     0.00

August 15, 2019

     100.00     100.00     100.00     85.96     20.59     0.00

September 15, 2019

     100.00     100.00     100.00     75.40     10.39     0.00

October 15, 2019

     100.00     100.00     100.00     65.16     0.46     0.00

November 15, 2019

     100.00     100.00     100.00     55.22     0.00     0.00

December 15, 2019

     100.00     100.00     100.00     45.55     0.00     0.00

January 15, 2020

     100.00     100.00     100.00     36.15     0.00     0.00

February 15, 2020

     100.00     100.00     93.32     27.03     0.00     0.00

March 15, 2020

     100.00     100.00     84.04     18.20     0.00     0.00

April 15, 2020

     100.00     100.00     74.89     9.66     0.00     0.00

May 15, 2020

     100.00     100.00     65.89     1.41     0.00     0.00

June 15, 2020

     100.00     100.00     57.02     0.00     0.00     0.00

July 15, 2020

     100.00     100.00     48.30     0.00     0.00     0.00

August 15, 2020

     100.00     99.71     39.73     0.00     0.00     0.00

September 15, 2020

     100.00     90.17     31.31     0.00     0.00     0.00

October 15, 2020

     100.00     82.18     23.89     0.00     0.00     0.00

November 15, 2020

     100.00     74.20     16.59     0.00     0.00     0.00

December 15, 2020

     94.31     66.21     9.40     0.00     0.00     0.00

January 15, 2021

     85.88     58.23     2.33     0.00     0.00     0.00

February 15, 2021

     77.40     50.25     0.00     0.00     0.00     0.00

March 15, 2021

     68.86     42.28     0.00     0.00     0.00     0.00

April 15, 2021

     60.27     34.31     0.00     0.00     0.00     0.00

May 15, 2021

     51.62     26.35     0.00     0.00     0.00     0.00

June 15, 2021

     42.91     18.39     0.00     0.00     0.00     0.00

July 15, 2021

     34.14     10.45     0.00     0.00     0.00     0.00

August 15, 2021

     25.32     2.50     0.00     0.00     0.00     0.00

September 15, 2021

     16.44     0.00     0.00     0.00     0.00     0.00

October 15, 2021

     7.50     0.00     0.00     0.00     0.00     0.00

November 15, 2021    

     0.00     0.00     0.00     0.00     0.00     0.00

 

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Payment Date    0.25%      0.50%      1.00%      1.50%      2.00%      3.00%  

Weighted Average Life (Years) to Call

     4.26         4.00         3.41         2.81         2.28         1.62   

Weighted Average Life (Years) to Maturity

     4.26         4.00         3.41         2.81         2.28         1.62   

 

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Percent of the Initial Note Balance at Various ABS Percentages

Class D Notes

 

Payment Date    0.25%     0.50%     1.00%     1.50%     2.00%     3.00%  

Closing Date

     100.00     100.00     100.00     100.00     100.00     100.00

March 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00

April 15, 2017

     100.00     100.00     100.00     100.00     100.00     100.00