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CRIF Lending Solutions Blog

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Burning the Ships: Moving Beyond Manual Loan Software Funding to eContracting

“Those who do not learn from history are doomed to repeat it.” While it is probably true that this old adage is more directed toward avoiding the mistakes of the past, it can also apply to understanding that sometimes great lessons can be learned from the actions of others – even if at first glance there doesn’t seem to be any correlation. 

Consider that Hernán Cortés landed on the eastern coast of Mexico in 1519 with 11 ships and 500 men to battle Montezuma II. For our purposes in connecting this somehow to lending, the battle that ensued is not the interesting part of the story. What’s interesting is that when they arrived, Cortes ordered that the ships they had travelled in from Spain be burned. Why? Without the ships, there was no turning back, no matter how hard the road was to become.

With that in mind, let’s think about how we use technology in our lending practices, especially in the indirect lending arena.

Several years ago, a wave of technology advances began aimed at supporting e-signature so that documents could be executed without mounds of paper for the financial institution to manage. It was all aimed at improving the customer/member experience by making the process of loan closings more expedient and flexible. 

Initially, financial institutions were slow to adapt, but that has steadily changed over recent years as many companies are now striving to keep up with the changing demands of the market. In the indirect lending space, the focus has now begun to shift, not away from consumers per se, but toward technology that improves the speed and accuracy of post-contract funding for dealers. This is why Dealertrack created its eContracting solution.

What is eContracting?

It is a software solution designed to provide complete end to end processing of financed loans by connecting both the dealer and lender with paperless communications. At the point of sale, the finance manager can initiate the contracting process with the consumer and offer e-signature on an iPad or Android device. Once signed, contracts can then be electronically submitted to the lender via eContracting integration into the LOS for processing without the usual delays of hand-delivered or FedEx packages. Same day funding is able to be accommodated. This is a win-win for all parties involved.

How does it work in a loan origination system?

Your loan origination system should feature full integration with Dealertrack eContracting. Here is a quick summary of how they should work together:

  1. Once a contract is signed by the consumer, the dealer can submit an eContract to your platform through Dealertrack. This submission imports all of the contract details as well as supporting documentation.

  2. Your loan software then uses verification rules to check the contract details for accuracy, including borrower and collateral information. If those details are correct, an “eVerified” status is returned to Dealertrack. If there is an error, an “eError” status is returned with the rule failures so they can be addressed by the dealer.

  3. As long as the contract passes all verifications, it can be funded automatically. Verifications also include ensuring all stipulations have been cleared, confirming no checklist items have been left unsatisfied, and running contract rules so there are no funding exceptions that need to be addressed. Automatic funding is not required and should be enabled/disabled when configuring the feature.

Is it time to burn the ships?

Think about how the times have changed in lending. In the late 70s, credit report information was gathered with a phone call to the bureau. Since then, we’ve seen the advent of online applications, more robust decisioning and e-signature, just to name a few. All of this is now at the user’s fingertips on a variety of devices. Technology has pulled us along. Could we ever go back? Should we stay put or keep pushing forward? Burn the ships. We’ve come this far already, so we must keep moving. Consider if eContracting is right for your organization. If you are ready to take the next step into new territory, let us know, and we’ll help get you started.

Our CRIF ACTion loan software is the industry’s best option when it comes to eContracting. For more information on our Dealertrack eContracting solution or on CRIF ACTion in general, please click the button below to schedule a consultation.

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Michael Street is the Vice-President of Client Delivery for CRIF ACTion.

Photo Credit: Michael R Perry

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