Motor Vehicle Title Management Process
In part 1 of this series, we discussed how the motor vehicle process makes things difficult for borrowers to title and register cars and trucks, as well as how that can negatively impact you, the lender. Today we’ll examine another roadblock that obstructs successful motor vehicle management: Electronic Lien and Titling (or ELT for short).
What is ELT
The dictionary defines ELT as a program offered by various states allowing state DMVs to electronically exchange lien and title information with lienholders in lieu of a paper certificate of title. Several frustrated lenders might describe it more colorful, but less blog-friendly terms.
In theory, ELT offers an attractive technology that can make the vehicle titling process easier and more efficient for states, lenders and borrowers. An electronic motor vehicle title is much more efficient to process than a paper one. It’s also easier to keep up with and store. For an electronic vehicle title, all you need is a computer system. For a paper title, you need a way to physically store them in one safe and secure place. That can be an expensive proposition. ELT is designed to eliminate that.
Do all states offer ELT?
But not all states have ELT, and of those that do, it’s not always mandatory to use, eliminating the very benefits the program is meant to provide. Of course, this leads to confusion, and confusion never mixes well with lien perfection. When a multistate motor vehicle lender issues a loan in a far away jurisdiction, they must determine whether that state offers ELT and if it does, find out if it’s mandatory to use? They also must maintain two kinds of storage systems – one for electronic, the other for paper titles. This slows the efficient motor vehicle management process; the opposite of what ELT is designed to do.
In addition, if a lender makes motor vehicle loans in multiple states, someone on staff must keep track of which states offer it and which don’t. That person also needs to know if its use is mandatory or just an option so that the lender can act accordingly. That takes time to research, track and update. It also distracts the staff member from other important tasks. Of course, states can (and have) switched on a dime, going from offering ELT as an option to suddenly mandating its use. Nevada is one such example of a state that suddenly and unexpectedly switched without warning, giving lenders no time to adjust.
What determinations must a lender make
But that’s not the only ELT roadblock in the way. A lender also must determine whether a state title process is lienholder-held or owner-held. When ELT is available in an owner-held state, it helps lenders more easily track the title. There’s an easily accessible record in an electronic format. This is a real benefit to lenders. However, remember, not all states are owner-held states and not all states make ELT mandatory. It’s up to the lender to keep track of which state is which, and that’s a time-consuming task that otherwise distracts from the smooth flow of the motor vehicle management process.
Working in owner-held states that do not mandate ELT, or do not even offer it, is becoming more problematic. When a paper title is in the hands of the owner… well, who really knows where it may end up? The vehicle title could be in a filing cabinet in the borrower’s home, it may be thrown into the glove box of the secured asset (the motor vehicle), or it may just vanish. This obviously makes tracking titles difficult, at best, in this environment. When a title is difficult to track, it stalls workflow and increases the lender’s risks.
Why don’t all states make ELT mandatory? That’s a great question. Unfortunately, there are no simple answers. When it comes to state and local governments, bureaucracy reigns. Many states do have ELT legislation in process, but like any other bill, it takes time to become law. For a motor vehicle lender looking to efficiently perfect liens, protect assets, reduce risks and turn a profit, patience truly is a virtue when it comes to ELT adoption.
There is a better way
In the world of motor vehicle liens, lenders have the most at stake but often have the least support. But, savvy financial institutions know that there are better options available. To overcome the challenges to securing and maintaining perfection, an accomplished lien services provider is ready to address lien management from start to finish.
A best in class provider will not only understand a lender’s specific needs but can provide access to the complete range of expertise and tools for meeting them. The right relationship will deliver value not only at the initial phase of title processing but throughout the entire spectrum and time-span of title management.
In part 3 of this series, we’ll examine titlewashing – a nefarious act that can greatly raise the risks lenders face. Look for that entry soon.