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Managing auto loan portfolios has become increasingly complex in recent years, in part because of the growing number of “skips” and increasing deficiency balances. These trends make it imperative to be proactive and diligent in your loss mitigation efforts, and your collateral protection program plays an integral part of that strategy. A regular review of the processes and approach to ensuring your portfolio is properly insured is critical. Objectives and scorecards must be properly aligned between the credit union and your business partner and what follows are key questions that should be asked routinely.

Have you established a risk management focus? By definition, risk management should be a proactive process, with the focus placed on actively determining and remedying exposures. Although counter-intuitive, the end game should be to force place as little as possible. Ultimately, the “can’ts” and “won’ts” will generate the revenue necessary to pay for tracking and customer service. If it does not, however, you are better off paying for the proactive benefits that both tracking and borrower communication provides. Your program should be customized to identify the unique aspects of your lending demographics. And if warranted, it might involve identifying and establishing different coverage and processes for each segmented portion of your portfolio (i.e. borrower demographics, credit tier, funding source, etc.). It is critical to stay involved and constantly work with your business partner to develop customized best practices. What and how you mitigate loan exposure should be unique to your portfolio.

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