SameDay director of servicing on program revisions, affordability

SameDay Auto Finance has revised its lending program to account for rising losses and affordability challenges in the subprime market . Armando Hidalgo joined Irving, Texas-based SameDay as director of servicing in October 2022 after serving for more than five years in the same role at Clearwater Fla.-based Platinum Auto Finance . [caption id="attachment_81597" align="alignright" width="148"] Armando Hidalgo [/caption] In the year since Hidalgo moved to SameDay, the lender has made changes to origination and servicing operations. SameDay in June tightened credit standards , revamped early payment default monitoring and improved its customer onboarding program to better manage credit performance and prepare for growth in 2024, Hidalgo told Auto Finance News . “We’ve made changes to our program to curtail the affordability issues we’re seeing,” he said. “People are losing their long-term jobs and going into new jobs that aren’t paying as much. While that’s not prevalent, we’re starting to see a trend.” SameDay’s portfolio sat at about $20 million as of this month following an estimated 33% run-off since October on the heels of program revisions, Hidalgo said. The lender receives funding from a regional bank as well as private investors. “Our portfolio size had pretty much stopped [growing]. The runoff [has] plateaued and now we’re starting to gain some ground for 2024,” he said, noting that the financier plans to expand into refinance and powersports financing in early 2024 and grow geographically. Auto Finance News spoke with Hildago about the lender’s transition. What follows is an edited version of the conversation. Auto Finance News : How has SameDay adjusted to factor affordability challenges facing subprime borrowers? Armando Hidalgo: We've adjusted our [payment-to-income] and [debt-to-income] ratios to 15% and 40%, respectively. It used to be a little higher on the PTI and lower on the DTI. Many households now want to have two vehicles, so we do a lot more family-oriented business. We had to revise our program to fit our business model. We had a final draft in April and got our first business in June. We’re getting better originations and we’re seeking out additional dealers with the new program. On the servicing side, we enhanced early payment defaults. We treat welcome calls as customer orientation and educate them on what their interest rates are. We try to get them to perform well in the first six months as that is when the loan sees the most interest accrued on a defaulted payment. We’re seeing better performance from the revised program. We also kicked off in the spring voluntary surrenders of vehicles. To mitigate losses, we take it back to the originating dealer; sometimes the dealer will buy the car and that cuts $1,300 to $1,500 in costs. When consumers turn in the keys with the vehicle, that also saves hundreds in costs. It benefits the customer that we're trying not to add any more fees to their loans. I see one to three surrenders a month. AFN : Looking to 2024, how is SameDay working to better manage portfolio risk? AH : We’re looking at launching refinance at the end of the first quarter for customers who are performing well. We want to incentivize them to say if they started at one interest rate, they can drop it by 5 to 10 percentage points depending on the value of the vehicle. Our average percentage rate sits at about 22% across our four tiers and we're looking at about 19% APR once refinancing is implemented as we move out of deep subprime into more near prime. Affordability is one of the reasons we want to go into refinancing our loans in-house. Refinancing the balances to drop the interest rate on well-performing loans is something that's going to free up money. When we refinance that loan, it’s going to free up $100 to $150 in savings that consumers can use toward vehicle insurance. One of the affordability issues that we're seeing is insurance. Credit-challenged people tend to get charged a higher rate for insurance. We initiated force-placed collateral protection insurance in February on outstanding loans because between 55% and 63% of our portfolio was uninsured. That number dropped to about 40% as we verified many consumers’ insurance coverage. Collateral protection insurance coverage is now an option at origination along with liability coverage if they qualify, or a combination with full coverage. All of this is an effort to mitigate losses. AFN : Where is SameDay looking to expand? AH : We’re adding new dealers under the revised program. With the changes to our program, with a new dealer it'll be easier for your program to succeed as opposed to a legacy dealer. We kept our legacy dealers and are re-educating them on our program. You must make changes, especially in these times, to come out on the other side. We are working with about 100 dealers, largely in Texas, and are expanding to Oklahoma in 2024. We’re also looking to bring on powersports financing next year. We’re expecting $3 million to $5 million in originations per month in 2024. I'm looking forward to 2024 with this new program and the servicing team now solidly in place.

SameDay director of servicing on program revisions, affordability

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