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How Shaw Software Helps Lenders with Repossession: An Overview
Overview
In this edition of Shaw’s blog, we will examine the role Shaw’s Spectrum system plays in the repossession of assets our lending clients execute. Here, we will provide an overview of repossession in Spectrum. In subsequent editions, we will go into detail about each of the three main areas of repossession from a software perspective: decisioning, assignment, and remarketing and accounting.
The repossession of collateral is a well-defined and regulated action lenders must sometimes make to protect against additional loss in the event of non-payment. These regulations provide constraints in the way lenders must notify borrowers and behave when repossessing collateral. Within these constraints are thousands of decisions lenders must make when determining how to work with borrowers before repossessing, which collateral to repossess, how to execute the repossessions, and what needs to be done with data and accounting once the collateral has been repossessed.
Decisioning
The most significant area for improvement Shaw’s Spectrum system provides is in decisioning. The problem that auto finance companies have is that there is too much information that needs to be accounted for when trying to make the decision to repossess.
Lenders are left grouping accounts into large buckets based on limited, but broad information, like days delinquent, loan balance, and value of the asset. With only partial information available, managers are faced with a complex and manually intensive decision matrix to determine which accounts to assign for repossession.
Spectrum can account for thousands of data elements and take into consideration the account, borrower behavior, the asset, and the cost of repossession. Activities applied to accounts meeting specific criteria can initiate a whole host of automated actions, including deciding to assign a vehicle for repossession.
Utilizing data that is both relevant and greater in quantity, Spectrum has automated the decision to repossess for the majority of eligible accounts. Lenders are left with the insight, data, and tools to properly manage accounts appropriate for repossession. Spectrum will provide the right information for consideration to the right people, automatically. Industry standard workflows will ensure compliance, oversight, and execution of these accounts that satisfy the organizations standards.
Assignment
Whether a lender is working with a repossession aggregator or not, assigning the vehicle for repossession is the next step in the repossession process. The problem for lenders today is this process becomes unwieldy, data becomes old very quickly, and informal processes and communication is created to fill in the gaps.
Who is the best partner to assign this repossession to? How do I know? How much does that cost? How long has the vehicle been out for assignment? Have they found it? What’s the condition of the vehicle? These questions and scores more must be answered constantly, repeatedly, and correctly. And they must be answered thousands of times over for lenders with large portfolios.
By accounting for your repossession partners directly in the system, or by integration to the aggregator of your choosing, Spectrum can account for all the information relevant to the above questions when assigning an account for repo. And with smart queueing and workflows, the system can ensure every single step in the process is followed exactly, every time.
With new assignments going out and updated information coming in from the field automatically, a complete view of repo assignments is created. Lenders have visibility into the accuracy, reliability, and cost of the repo partners they work with.
Remarketing and Accounting
With the velocity and volume of accounts in some stage of the repossession lifecycle, lenders can become less efficient in the latter, but equally important phase of remarketing.
Understanding the most cost-effective auction to send a particular vehicle to requires a lot of data and analysis. Finalizing the cancellation of outstanding warranties and insurance products added on to loans requires a lot of tracking. And notifying borrowers of their rights throughout the process requires a lot of planning.
For lenders who experience a lot of growth, the underlying technology has not kept up with the business to properly manage remarketing, so it will become disproportionately expensive for them. Despite their best effort, many lenders will not remain compliant with requirements around borrower communication. Lenders begin to lose track of all the accounting requirements that come with properly reporting a complete deficiency balance.
Spectrum provides robust features that allow automation of many of these critical requirements. Utilizing remarketing workflows, lenders can ensure each step in the remarketing process is complete before moving on to the next phase. This means the proper tracking of where collateral is, what the minimum bid might be, and what the proceeds from auction were. Next, Spectrum workflow can ensure the proper cancellation of outstanding warranty and insurance products and automate all the associated accounting. Finally, the automation of the required deficiency letter can be sent to the borrower.
Shaw clients on our Spectrum platform utilizing workflow automation can be sure that they are compliant, that accounting is done properly, and that they can report compliance. The remarketing department that once developed processes on top of processes to do their job properly, suddenly have all the information they need in a single system.
Conclusion
Shaw Systems is in a position to see many lenders working hard to solve for the business requirements of their repossession department. Lenders do not have the technology or partner in place to account for all the variables considered in the repossession process. With Shaw’s Spectrum system, as well as our decades of real-world experience, our clients are able to automate many of these processes and add control and visibility to those which require intervention.
If you’re interested in learning more about how Shaw’s Spectrum solution can help with your loan servicing process, please email us at solutions@shawsystems.com