New Technology Creates Efficiencies, Lowers Risk
Technology can certainly make auto lenders more efficient, but it can also help them minimize risk.
Meriwest Credit Union in San Jose, CA, uses software that enables its members to apply for all types of consumer loans including auto, retail, credit cards and mortgages, over the Internet. It also gives its branch representatives the ability to grant immediate approvals on many A and B paper loans, although not subprime loans.
The software “does most of the underwriting for us,” says Gregory B. Meyer, Meriwest’s community relations manager. The platform uses a matrix that considers the member’s credit score, income, debt-to-income ratios and current borrowings. “It saves us many underwriting hours in loan processing,” he says.
Among other things the platform analyzes loan and credit data in real time, performs multiple calculations to determine key financial loan variables, and performs all necessary ID verification, credit checks and security checks. In addition, it provides a comprehensive administration and management reporting system.
The Charlotte Metro Federal Credit Union in North Carolina recently obtained access to the state’s online title assistance database. The system is available to all of the CU’s branch lenders and allows them to access Department of Motor Vehicle records on the title’s current lienholder information and registration status.
“By reviewing the vehicle’s registration data at the time the loan is being processed, our lenders are better able to proactively identify and address any issues that could arise in perfecting our lien,” says Randy Kegarise, vice president of lending at Charlotte Metro. “This makes the whole loan process more efficient by eliminating delays in obtaining correct lien certification from the DMV.”
The two CUs are also using new tactics to grow their auto loan portfolios while managing risk.
Charlotte Metro recently launched an e-mail marketing campaign to specific segments of its member base. “When we market to these borrowers, we consider factors such as length of time with the credit union and overall account relationships and include any prior repayment history with us,” says Nicole Morris, the CU’s chief operating officer. “We go beyond what we see on the credit report to fully understand the situation and determine the true potential risk.”
In addition to its other functions, Meriwest’s loan underwriting platform also generates reports for data mining campaigns using real-time information.
Motor vehicle loans are often the entry point for more and deeper customer relationships with Meriwest, a big indirect auto lender. The CU has a dedicated loan officer whose task is to build its book of business with local auto dealers in the area, Meyer says.
“One of the best introductions and interactions we can have with a potential new member is by giving them a loan with excellent terms and an affordable rate,” he says. “Often, these members who are brought in initially by a good loan will become fully fledged members of the co-op with their family banking.”