Due Diligence is Key to Lending Success



In early 2015, we were approached by a long-time client of ours about helping them audit their loans.  Loan auditing was not a service that we were currently offering at the time, but it matched up well with our core competencies, so we decided to take it on. Turns out, many of our clients did not have an accountability program in place, so in May 2015 we officially started offering what we now call our Smart Loan Audit service. We’ve worked with many credit unions on loan audits over the past year+, and we wanted to share some of our key findings with the readers of CU Business this month.

What We Track

First off, when it comes to auto lending, it’s important to be able to track the origin of the loan (i.e. by dealer, by loan officer, etc) so you can identify where your problem areas are. With that in mind, here are some of the key things we track:

  • Turnaround times
    • Turnaround from application date to decision
    • Turnaround from decision to funding
  • Time between trade
  • Secured debt ratio
  • Unsecured debt ratio
  • Negative equity
  • Mortgage to income ratios
  • Amount of add-ons
    • Certain dealers are notorious for charging too much on products placing the credit union in an at-risk situation while they make all the money

What Can We Learn?

  • Do we have a maximum amount for back-end products?
  • Do more of our at-risk loans come from certain dealers?
  • Do we have loan officers that are too risk adverse?
  • Do we have loan officers that take too much risk by not developing the application?
    • Gaps in employment with no explanation
    • Employment, both current and previous have limited time
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