By John Flynn, CEO, Open Lending
Credit unions and community banks come to us for a variety of reasons, whether it’s serving more underserved communities or expanding their lending portfolio. Amarillo National Bank was looking to offer a winning solution to its community, its shareholders and the dealers with which it does business.
Amarillo National Bank Senior Vice President John T. McElyea explained to me, “We're the largest and oldest home loan bank in the United States. In our region, we're a big indirect lender, but one of the things we're missing out on – our car dealers needed and wanted extended terms on higher mileage vehicles. That wasn't in our risk appetite.”
We have an answer back in seven seconds! – John T. McElyea, SVP, Amarillo National Bank
Open Lending had a solution for the financial institution: Lenders Protection. Lenders Protection features default insurance coverage for near- and non-prime auto loans, allowing lenders to loosen their wallets a bit when making loans to credit-challenged borrowers who simply need a car to get to work.
The indirect channel has been very successful in recent years, for credit unions and banks, alike. One of the issues that can arise between dealers and lenders, however, is willingness to offer financing to car buyers who have less-than-stellar credit or need longer terms. Open Lending uses all kinds of data, from payment-to-debt trends to make and model of the car, to determine a borrower’s true risk level, beyond the credit score. Lenders Protection makes lenders more confident, dealers happy and borrowers ecstatic!
“The dealers have been very receptive to it.” McElyea said. “We booked 39 deals in our very first month, which I think was very, very good. It's been a very, very huge benefit for our dealers for our customers that normally, we wouldn't be willing to take those loans on ourselves. But now that we have the backing through Lenders Protection, those are loans that we’re able to help our customers with.”
Getting started and managing the system is simple, too. McElyea and his team figured out and set up triggers, loans come in to Open Lending and then decisions are sent right back out. “It's easy. It's a click of the button. We have an answer back in seven seconds! Our dealers love it. We love it. And we've booked several deals that we normally wouldn't get in a month.”
Lenders Protection allows credit unions, banks and other automobile lenders to model their specific overhead and funding costs and set a target ROA for their insured portfolio. The result is a profitable auto loan portfolio with carefully managed pricing and risk characteristics.