Manage Exception Lists Faster, Easier
Understanding and managing the status of the motor vehicle liens’ portfolio can be challenging. Often times, inconsistencies or issues end up on the “Exceptions List”, that is then addressed manually by following up with the borrower, calling DMV, searching and pulling reports from multiple jurisdictions and places. Time is money, and too much of it is often wasted on this manual, tedious work. In addition, different DMVs and jurisdictions have varying levels of requirements’ complexity. With all of these variables, exceptions create a long road to perfection.
There is increasing pressure on motor vehicle lenders to turn around title registrations quickly, service loans and manage large portfolios of liens. Some of this work is tedious, manual and costly. Loans which take longer to perfect impose a higher administrative burden, which is often underestimated. Our experience suggests that, at a minimum, 25% of all loans to show up on exception reports. To handle that administrative burden you either have to hire additional employees or work your current staff overtime.
Also, while these loans remain unperfected, you are at risk in many different areas if something happens to the asset (like accidents, sale of the asset, the loan going into default, etc.). A credit manager at a large federal credit union told us that they “recently encountered a lien which was not handled properly causing a net loss of $27,000 on vehicle that was sold.”
So what are some areas that highlight exception challenges?
Your tickler system shows a report of unperfected liens
All lenders have a running list of titles that have not been returned within the specified time or those that dealers could not process for the end users. A typical scenario would have loan servicers following up with DMVs, ordering VIN searches and correcting VINs if needed, or requesting duplicate titles to replace lost ones. These processes are manual and take time. They can also be very difficult, because with a multi-jurisdictional footprint, lenders may not know who to call first.
Quite often, outsourcing these manual, tedious tasks is the best way to optimize the costs and the workflow of handling the exception lists.
Accounting for motor vehicle collateral in mergers and acquisitions
Lenders that are going through M&A have a lot on their plates; one of the most daunting tasks could be ensuring that the lender’s name is correctly updated on the titles pledged as collateral. Similarly, acquiring a fleet of vehicles needs proper title updates or lien adds.
When acquiring a portfolio of MV loans, a crucial step is converting the name on the liens to the acquiring bank. If the title does not have the correct lien holder information, it can affect portfolio health and bring additional risk. And, getting assets (titles) from previous lien holder (securing titles) is hard. But it can be done with the right tool set.
Subprime lending and longer loan lifecycles
With rising interest rates and lower credit scores, we are seeing more motor vehicle loans that go beyond 7 years. That was once unheard of, but longer timeframes make the tracking of a loan portfolio to ensure that lenders are still listed as lien holders a difficult task.
One way to mitigate this issue is through a VIN Search to ensure that the correct lender is reflected. This is a tedious task that, too, can be outsourced to a knowledgeable vendor.
Fraud comes in many forms for cars and trucks. The recent upswing in “title washing” can put lenders on the defensive.
Title washing occurs when one state’s DMV examines and labels a car or truck as “salvage” or “damaged.” A dishonest title holder or would-be seller then take that vehicle to another state, usually one far from where the flood or damage occurred. There he or she gets a new, clean title that wipes away the car’s or truck’s history. When washing a title, the seller can emerge with a “clean” title that does not accurately reflect a motor vehicle’s history. This clean title then allows the car or truck to be sold without the buyer ever being aware he or she is really getting damaged goods. And if that buyer finances the vehicle through a lender, the lender is also stuck with a car or truck that is anything but clean. Both the lender and the borrower are at risk in this situation. Many recent hurricanes left cars and trucks with salvage or flood titles that are hard to identify, unless you know in which state it was issued.
There is a better way
Consider the following example of an innovative, technology-forward bank with both direct and indirect lending: they wanted to improve digital experience for their customers, but were bogged down by tedious, manual processes on the back end.
The bank operates many branches in a decentralized way. The Loan Servicing department maintained a running list of exceptions that was handled by a dedicated employee, who was tasked with tracking if lien holders were added correctly, and if there were issues in the indirect lending arm of the bank that dealers could not address. To address exceptions, they had to research missing titles, perform VIN searches, request and track duplicate titles, and ensure the correct name of the lender on titles. That dedicated employee was spending a long time on the phone with DMV in different jurisdictions, and each day of delay exposed the bank to potential risk. The situation was extremely stressful, and the employee’s manager was worried they would quit.
Long story short, by leveraging the Lien Solutions service team, the bank was able to focus on their digital transformation while maintaining clear visibility into the status of their expected titles, duplicate titles and lien corrections.
Taking the next step
Outsourcing this manual, tedious work to a knowledgeable vendor not only reduces costs, and allows for more efficient use of resources, but also drives faster turnaround times, provides visibility, creates a predictable workflow and ensures motor vehicle lien perfection.
Let’s talk about your making exception reports a little less daunting. Call us today at 800-833-5778 and speak to one of our specialists about your specific needs