Automation is continually improving auto lending process efficiency, along with the quality and consistency of lending decisions. Replacing manual, mundane tasks and decisions with workflows and rules accelerates loan origination and enforces consistent decisions. Automation lets underwriters focus on activities that truly require their expertise.
Automation can improve the efficiency of nearly every step in the auto loan cycle, from application submission through loan payoff. In previous blogs, we’ve covered the benefits of digital applications, digital notifications, and auto finance structuring. where automation delivers measurable improvements in productivity. Let’s look more closely at auto loan validation, where automation enabled by workflow and decision rules and cloud-based verification services brings greater efficiency to tasks associated with income and employment validations and stipulations.
When Do You Need Auto Loan Validations?
Credit scores are the deciding factor in determining what additional auto loan validation steps are required when evaluating an applicant’s attributes. Decision rules that drive loan origination workflows make the process effortless. With exceptional or very good credit scores, it’s unlikely a lender is concerned about income or employment verification. For lower credit tiers, lenders can configure decision rules to evaluate downpayment, vehicle value, debt-to-income, and employment according to their established credit policies, and to determine if a suitable deal can be structured.
Fraud Analysis as the First Step in Validations
Because of the growing incidence of fraud, lenders need to act cautiously regarding income and employment verification. We’ve described how easily false pay stubs can be generated in an earlier Income Misrepresentation and Auto Loan Application Fraud blog and listed the sophisticated ways unscrupulous applicants can falsify employment in the Employment Misrepresentation In Auto Loan Applications blog. Consider incorporating fraud analytics into your auto loan validation process. Analytics can identify potential fraud and alert underwriters to the need for additional review and confirmation, helping prevent high-risk loans from damaging portfolio performance.
Workflow, Rules, and Cloud for Efficient Auto Loan Validation
Automation in the loan origination workflow minimizes time spent validating applicant income and employment by providing a consistent process. Applications that fall below a specified credit score threshold or that have income and employment as decisive factors (regardless of credit score), go through the validation process as a rule.
Application data is validated quickly through integration with cloud-based fraud analytic services. Using sophisticated algorithms based on the analysis of millions of auto loan applications, the service determines if there is any indication of misrepresented income or employment. Fraud analytics uses a consortium model, analyzing applications from across the US and continually refining to more accurately detect fraud.
Income Validation
If the result of fraud analytics indicates a strong possibility of income misrepresentation, the workflow can be configured to directly access income verification services such as Equifax’s The Work Number. If Equifax confirms the income, the application automatically moves to the next loan origination step. When Equifax disputes the stated income, a stipulation can be generated for further investigation by an experienced underwriter. Alternatively, a lender’s credit policies may determine that applications with misstated incomes are auto-declined.
Employment Validation
Similarly, when fraud analytics indicate a strong possibility of employment misrepresentation, workflow automatically accesses employment verification services such as Equifax’s The Work Number. If employment status is confirmed, the application moves to the next step of the loan origination process. In the event that the service is unable to verify employment, the workflow adds a stipulation for follow-up and validation by an underwriter. A lender may also decide that employment misrepresentation equates to a high-risk applicant and issue an auto-decline.
Tailor the Auto Loan Validation Process to Your Specific Needs
Easily configurable workflows and decision rules enable lenders to create auto loan validation processes specific to their in-house credit policies and lending practices. Modern cloud-based loan origination solutions are pre-integrated with fraud services from PointPredictive and verification services from Equifax’s The Work Number. This integration allows lenders to determine when and where in their validation process they want to access the services. Decision rules determine the next steps, based on the result of the services.
In all cases, fraud analytics greatly reduces the chance that a fraudulent application will become a default that damages portfolio performance. Automation minimizes the time that an underwriter must devote to income or employment validation tasks. Although stipulations require additional time on the part of the underwriter, they also provide an additional level of review and risk management. When income and employment stipulations are met, lenders minimize loan risk and book loans that improve portfolio performance.
Getting Started
defi SOLUTIONS provides cloud-based loan origination software that is pre-integrated with fraud and verification services. The result is more efficient auto loan validation. Take the first step toward avoiding lending risk and improving portfolio performance by contacting our team today or registering for a demo of defi LOS.
