Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 34

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1
Chunk 34
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 for securitization.

During 2008 and 2009 we observed
adverse changes in the market for securitized pools of automobile contracts, which made permanent financing in the form of securitization
transactions difficult to obtain and more costly than in prior periods. These changes included reduced liquidity and reduced demand for
asset-backed securities, particularly for securities carrying a financial guaranty or for securities backed by sub-prime automobile receivables.
We experienced improvements in the capital markets from 2010 through 2019, during which time we completed 36 securitizations. In April
2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which
our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular
quarterly schedule from January 2021 through January 2025. However, if the market conditions for asset-backed securitizations should reverse,
we would expect a material adverse effect on our results of operations.

 19 

Our Results of Operations Will Depend on Cash Flows from Our Residual
Interests in Our Securitization Program and Our Warehouse Credit Facilities.

When we finance our automobile
contracts through securitizations and warehouse credit facilities, we receive cash and retain a residual interest in the assets financed.
Those financed assets are owned by the special-purpose subsidiary that is formed for the related securitization. This residual interest
represents the right to receive the future cash flows to be generated by the automobile contracts in excess of (i) the interest and principal
paid to investors or lenders on the indebtedness issued in connection with the financing, (ii) the costs of servicing the automobile contracts
and (iii) certain other costs incurred in connection with completing and maintaining the securitization or warehouse credit facility.
We sometimes refer to these future cash flows as "excess spread cash flows."

Under the financial structures
we have used to date in our securitizations and warehouse credit facilities, excess spread cash flows that would otherwise be paid to
the holder of the residual interest are first used to increase overcollateralization or are retained in a spread account within the securitization
trusts or the warehouse facility to provide liquidity and credit enhancement for the related securities.

While the specific terms and
mechanics vary among transactions, our securitization and warehousing agreements generally provide