Auto lending has grown from around $700 billion in 2010 to a projection of more than $1 trillion in 2017. For better or worse, that rise included a slew of subprime loans with high interest rates and long terms. It probably comes as no surprise to learn many of those subprime loans fall into delinquency or default. When that happens, it’s typically up to the lender to pick up the pieces and try to recoup their investment.
Amid the figurative debris of loan defaults comes the process of repossessing the vehicle. While that part of the process may seem to the casual observer to be cut-and-dry, it can be anything but. It’s certainly more than simply sending someone out to get the car.
What’s a repossession affidavit?
To best manage the process of repossessing a car, a lender needs to be acquainted with something called a repossession affidavit. A repossession affidavit is a legal document that a lender files with the state DMV when a vehicle is repossessed.
The affidavit includes data such as how the vehicle was repossessed — either through voluntarily repossession or via a replevin order — the loan default date, the date of repossession, the amount still owed on the vehicle, the value of the vehicle, the VIN, and the rest of the vehicle’s identifying information. Every jurisdiction that operates a DMV will utilize some form of a repossession affidavit so filing this paperwork becomes as daunting as the titling process when a loan is issued in the first place. The info is pretty standard and these are not “scholastic” in nature.
Depending on the state, the format of a respective affidavit varies widely and DMVs can require slightly different information depending on how the vehicle is being used and who, specifically, the borrower is. For example, Texas accounts for vehicles that are part of a retail inventory.
Floor plan lien
A “floor plan” lien covers vehicles in a dealer’s inventory. If the dealer is in default under the terms of the security agreement, the lienholder may repossess and transfer ownership without securing title in the dealer’s name.
Illinois, on the other hand, takes a “Just the facts, ma’am” approach, asking little more than make, model, model year, VIN, and whether the vehicle is damaged.
These are only two examples of 50. While the same basic information is always required, states treat the process completely differently, and it’s up to the lender to make sure all the information is accurate if they want to recover their investment.
What’s the moral of the story?
Well, obviously a conscientious lender needs to pay close attention to the details when they issue a loan. Less experienced auto lenders like Credit Unions might not know the ins and outs of these processes, and it's crucial to secure the loan in case the borrower defaults. Any and all gaps that exist in a titling process makes the retrieval of a vehicle, the correct completion of a repossession affidavit, and the ultimate collection of a debt more difficult — if not impossible. The right title management process can get you started on the right foot.
Talk to an expert before you are left with holes in your vehicle lending portfolio.