August 3rd, 2021
As lenders continue to weigh the option of bringing all employees back to the office or offering flexible remote working solutions, they are also evaluating programs/technology that will help streamline loan servicing in a remote working environment.
For this reason, many lenders are migrating from auto tracking and force-place program to a blanket LSI model. LSI coverage protects auto portfolios, while eliminating the need to track or force place insurance. It also removes the common issues associated with tracking programs; borrower complaints, false force placement, increase premiums & charge offs, etc. Most importantly it eliminates all insurance mail processing within auto portfolios. Overall, there are no administrative burden associated with VSI programs.
Not only will it reduce the manpower needed to service auto portfolios, VSI also helps lenders avoid unwanted regulatory scrutiny that Auto/Tracking CPI programs continue to encounter year after year. Many predict that regulations will tighten even more under the new administration, especially around programs that largely affect lower credit tiers.
Below is a summary of regulatory issues and lender issues that Auto/CPI programs create.
Ultimately, many lenders feel that tracking and CPI programs create unnecessary regulatory risk and penalizes borrowers that may already be struggling financially. Many times, force-place premiums are only applied to the lesser credit tiers within auto portfolios, which can be viewed as borderline predatory to borrowers in that category (who are potentially paying a higher interest rate).
VSI is already the most preferred risk management approach in many states; and for the reasons outlined above, many lenders across the country are making the leap. Please reach out to your local rep for a VSI quote or consultation below.