Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Matt Fassler - Goldman Sachs
Matt Fassler - Goldman Sachs
Congratulations on your performance here, a couple of questions if I could largely on credit, could you just go into a little more color on the increase in the underlying gain on [inaudible] sold to 4.2%. You talked about funding costs, you spoke about credit enhancements, just a little more color on what exactly went on and also on how sustainable you think that 4% rate would be.
Keith Browning
We saw a measurable decrease in the benchmark rates so that’s the principal reason and then based on our current outlook, our enhancements are down significantly and then the other piece that goes in with that is the fact that the losses will also be substantially lower based on our projections, all gets baked into the increase.
Whether we can sustain the what used to be called the normalized range of 3.5% to 4.5%, obviously will depend on what the consumer tells us so as you know we are very cognizant of three day payoffs and will adjust consumer rates accordingly.
But as far as those other elements then it just depends on what happens to benchmark rates in the short term and we wouldn’t expect any material change in the loss rates and the enhancement levels that we assumed in this quarter.
Matt Fassler - Goldman Sachs
Was the tightening in credit standards during the quarter incremental to the second quarter, or is something that you’ve been implementing kind of over the past couple of quarters.
Keith Browning
We did some testing in the first quarter of what we ended up doing, rolling out more broadly in the second quarter, so we’ve been doing some incremental tightening actually since the second half of last year. Early last year we were basically focused on capital preservation and as I think we described it, we were talking more about what’s a level of equity a consumer had to be and then as time progressed, we ended up starting declining customers that we previously approved.
In the first quarter this year we actually were testing further declining customers that we would have previously approved and based on the results of that, we rolled that out at the beginning of the quarter.
Matt Fassler - Goldman Sachs
And we had noted I guess in your latest securitization filings for the past couple of months looked a little bit rougher from a delinquency perspective relative to typical seasonal trends then we had seen earlier in the year, is that part of what led you to make this move.
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