DALLAS — Proof of income is just “one of many” structural elements Santander Consumer USA evaluates when underwriting, Chief Executive Jason Kulas told Auto Finance News in response to criticism generated by a May 22 Moody’s Investors Service report.
The report revealed that Santander verified income on 8% of auto loans it securitized in a recent $1 billion issuance, compared with 64% for loans in a 2017 securitization sold by General Motors Financial Co.’s AmeriCredit Corp. unit. “We have to be focused on setting the consumer up for success,” Kulas said. “There are many ways to do that. You can verify income, and in certain cases, we have a very detailed program we go through that determines whether or not we stipulate for proof of income, but it’s so much more than that.” The structural elements SC evaluates include loan-to-value and payment-to-income ratios, the dollar amount of the payment, and down payment amount.
The low percentage of income verification may be cause for the rise in delinquencies and losses SC has experienced lately, Moody’s wrote in the report. However, Santander’s recent year-over-year decline in originations — including a 21% drop in the first quarter — are evidence that the company has been more disciplined in credit standards, Kulas said. “If we were ignoring the status of the consumer, putting people in loans that weren’t appropriate for them, ignoring those factors and just chasing volume — then we wouldn’t have had substantial year-over-year decreases in volume,” he said. “We’ve got decreases in volume because we’re holding the line on all the structural elements we think are appropriate for long-term success.”
