Collaborative ABS Issuance: A Strategic Opportunity for Credit Unions
By Ryan McCarroll, Vice President, Capital Markets
September 11, 2025
Asset-backed securities (ABS) have become an increasingly important tool for credit unions seeking funding and liquidity management solutions. Historically, credit unions were largely sidelined in ABS markets due to size constraints and regulatory ambiguity. However, with the NCUA’s safe harbor rule in 2017 and steady growth, credit unions have entered the ABS market providing access to more investor liquidity than was previously available. Since then, 15 credit unions have issued ABS for almost $6 billion.
Issuing an ABS begins when a credit union (or group) pools homogeneous loans into a bankruptcy-remote special purpose vehicle (SPV) or trust. This structure is important as it isolates the assets and protects investors from failure of the originating lender. The trust then issues securities, whose principal and interest depend on the performance of the loans, with cashflows structured to appeal to a diverse set of investor needs. Completing a securitization is a complex process and involves collaboration among many parties, including investment bankers, legal counsel, rating agencies and trustees. Coordination among these parties is critical to ensure successful execution and investor confidence.
Recently, Alloya achieved a significant milestone by launching the first-ever multi-seller credit union auto ABS transaction. This pioneering structure allowed multiple credit unions to pool their auto loans into a single securitization, breaking traditional barriers of entry. This structure attracted considerable investor interest and also set several new operational precedents for future collaborative issuances within the industry.
Now, when considering securitization, credit unions can decide between issuing independently or collaborating with peers. Solo issuance can offer more control over the transaction structure, underwriting standards, and branding, benefiting credit unions with substantial scale and distinct strategic objectives. However, these benefits come with notable challenges: Many of the issuance costs are fixed regardless of issuance size, meaning smaller-scale transactions can become economically inefficient. For liquidity reasons, investors typically favor larger transaction sizes from issuers that consistently sell into the market. This means a credit union must commit to large and repeat issuance to reap all the economic benefits of the ABS market.
Collaboration addresses these key challenges effectively. By joining forces, credit unions share fixed costs, lowering each participant's economic burden. Collaborative transactions also mitigate individual issuance volume pressures, meeting investor expectations for sizable and regular securitizations without straining individual credit unions' balance sheet capacities. Additionally, operational collaboration provides mutual support in navigating the complexities of ABS issuance, pooling expertise and resources to streamline processes like reporting, compliance and servicing.
Looking ahead, collaborative ABS issuance represents a strategic opportunity for credit unions to effectively compete and thrive in capital markets. By leveraging collective strength, credit unions can access cost-efficient funding sources, diversify risk and maintain lending capabilities that directly benefit their membership. Alloya's recent multi-seller ABS serves as a successful blueprint, demonstrating tangible benefits and underscoring the necessity for continued innovation and collaboration in the industry.
To learn more about collaborative ABS issuance, please complete our interest form, and our team will follow up with you.