Industry Veterans Launch Indirect Nonprime Auto Lending Company
DENVER, Colo. — When Centrix Financial was affected by regulatory actions against its primary clients, credit unions, several of the top executives behind the company decided to leverage their experience by branching out to establish a new indirect nonprime auto lending company — Universal Special Auto Finance.
The executives banded together and officially formed Universal in the fourth quarter of 2006.
"Although the company was established in the fourth quarter of 2006, it is actually an enhancement of proven, successful methods for loan generation, underwriting and servicing/collections," Steve Norbut, vice president of dealer sales, explained to SubPrime Auto Finance News.
"Universal and its partner financial institutions now benefit from the expertise and experience that was gained through the development of the Centrix portfolio, which consisted of about 250,000 loans, totaling more than $4 billion. The company had relationships with more than 5,000 auto dealers and 200 financial institutions in 45 states," he continued.
Quite simply, Norbut said the company's goal is to make "subprime lending as easy as prime lending."
While the company is starting out slowly by reaching out to dealers in different states, executives said the company has plans to the cover the entire continental U.S. soon.
Universal said its primary focus is indirect subprime auto finance lending, which dealers can access by sending in customer credit applications via a variety of lender platforms. Universal is currently establishing relationships with DealerTrack, RouteOne, Finance Express and Credit Smarts.
To better focus on reaching credit-challenged customers, officials said the company plans to work with both franchised and independent dealers.
"We want to deliver our product through both channels and be available wherever special finance customers are present," Norbut said. "Our standards remain high for independent dealers as we look to be aggressive with this part of the market."
"We look for strong consistent financial health, clean and well-organized dealerships, and most importantly, the proper inventory for our program," Norbut explained.
He also noted that the company monitors dealer performance on an ongoing basis to ensure compliance and performance.
To help dealers create the right deal the first time, executives said they provide a "road map" outlining the minimum credit requirements needed of customers for approval.
The requirements include:
—A minimum credit score of 500
—Deal minimum income of $1,500 a month from a single source
—No more than one bankruptcy and it must be discharged; no dismissed bankruptcies
—No more than one repossession and none within the last year
—No more than one previous foreclosure and none within the last year
—Qualifying credit: An aggregate $1,000 high applied for credit of three or less trade lines, with no more than 2×30 delinquent within the last 24 months on any one account
—Derogatory Credit: No more than $2,500 aggregate derogatory credit in the last 12 months and no more than $5,000 aggregate derogatory credit in the last 24 months
—No more than two Universal loans at one time
"We look at a comprehensive view of the credit file, since the credit file's factors are all dynamic in relationship to each other. It is very difficult to pinpoint one aspect that helps or hurts a consumer," explained Sheryl Gurrentz, chief operating officer. "We look at patterns and stability. We are looking for a minimum credit threshold, which is determined by credit score.
"Once this minimum qualification is met, then Universal's custom score determines other factors such as APR, term, payment, etc," she added. "We provide a dealer with the minimum credit qualification on our grid. If the loan meets this minimum, we will approve – subject to verification. Universal saves dealers time by conducting auto verifications through Lexis Nexus."
The company said interest rates will range from 15.99 percent APR up to state max APR, depending on the consumer's credit history. Additionally, the company noted that once all the stipulations are satisfied, most contracts are funded within 24 hours through ACH.
With automated approvals and declines, dealers can run an application on a customer at any time of the day, USAF officials highlighted.
"We make it more efficient for the dealers so they can provide a higher level of customer service," Gurrentz noted. "They don't have to structure an entire deal only to find out on the callback that we won't approve the loan the way it is written."
What does Universal's typical loan look like? According to Norbut, it is expected to be about $18,200, with a 66-month term.
"Universal's maximum loan term is 72 months," he said. "Guidelines are not model-year specific on 72-months, but rather based on mileage. We allow up to 80,000 miles."
Universal entered into a five-year business process outsourcing contract with Computer Sciences Corp. for lending software, accounting support and collections and related back-office services.
"We knew that CSC's experience and flexibility would bring a strong foundation to this innovative auto lending program," said John Scordo, executive vice president of business development. "This long-term strategic alliance with CSC will help us create an attractive opportunity for both non-securitized and securitized investments, and dealers will appreciate the program's fast, efficient credit decisions and consistent funding."
CSC said it has been managing securitized and non-securitized loan portfolios since 1990, noting that more than 200 financial institutions have relied on the company to manage acquisitions, conversions and servicing for more than $10 billion in loans.
Discussing Universal's goals going forward, Robert Sutton, chief executive officer and chairman, said, "Through Universal's program, subprime borrowers have an opportunity to restore their financial well-being and to purchase a vehicle in an environment of respect and fairness."
"What we're doing is making the subprime space easier to do business in. We revolutionized the space under Centrix, now with Universal, we're taking that to another level," he told SubPrime Auto Finance News.
Officials said they see nothing but good things in store for the company and the dealers it does business with in the future.
"We expect to continue to drive the future of this industry through automation and through our skills of building performing portfolios," Gurrentz said. "Through our expertise and innovation, we will continue with a diversity of lending sources and provide consistent capital to meet the ongoing needs of this marketplace."
For more information on the company, visit www.universalsaf.com. At the site, dealers can learn more and fill out information to receive a dealer packet.
Dealers may also contact Steve Norbut or John Scordo at (303) 773-4200 to learn more.