LAWRENCEVILLE, Ga. -

Perhaps while finance companies consider changes to underwriting practices as the fourth quarter approaches, Black Book’s latest white paper shows how executives and managers should be using collateral and residual values in the underwriting process.

Black Book highlighted that the paper illustrates the importance of how collateral and residuals can help finance companies manage risk levels appropriately and confidently, as well as facilitate the ability to identify continued pockets of profitability, particularly for longer-term loans.

Despite the Federal Reserve deciding against a rate hike last week, Black Book analysts insisted the strategy explained in their latest white paper will only grow in importance as interest rates eventually rise and finance companies need better visibility in determining the position of equity for their portfolios.

In the paper authored by Black Book Lender Solutions and titled, “Vision 20/20: Using Residuals to Spot Portfolio Growth Opportunity,” analysts reiterated access to collateral insight and residual data can help identify the right vehicle or segments, especially in an environment where loan terms are stretched out beyond 60 months.

“What’s more, collateral and residual data can team together to help lenders identify their tolerable inequity levels and set terms accordingly in order to minimize risk and accelerate profit potential,” analysts said.

Black Book also offered specific vehicle segment examples that show how different vehicles reach a position of equity at different intervals.

And while historical depreciation trends can help finance companies determine varying degrees of risk for the vehicles in consideration for a portfolio, Barrett Teague, vice president of Black Book Lender Solutions, pointed out the paper also shows how finance companies can maximize profit potential while minimizing this risk.

“An increasing number of lenders are realizing the importance that collateral and residuals can play in the underwriting process, and it all begins with access to accurate vehicle data,” said Teague, who will be moderating a panel session at Used Car Week’s SubPrime Forum where top executives from Chase, DriveTime Automotive and Exeter Finance are scheduled to participate.

“This practice will only become more important as auto loan terms grow beyond 60-month terms and interest rates eventually rise, placing more pressure on the ability to minimize risk while remaining profitable,” Teague continued.

Black Book’s latest white paper, “Vision 20/20: Using Residuals to Spot Portfolio Growth Opportunity,” can be downloaded for free by clicking here.

Teague and other members of the Black Book team again will be at Used Car Week to present the SubPrime Auto Finance Executive of the Year Award, which was given to Ian Anderson of Westlake Finance Services last year. This year’s recipient will be on hand during Used Car Week, which runs from Nov. 16-20 at the Phoenician in Scottsdale, Ariz.

The discussion that’s being titled, “Soaring in SubPrime,” and moderated by Teague is just a part of what’s on tap for the SubPrime Forum. Presentations by organizations such as Experian Automotive, Equifax, Benchmark Consulting International and Hudson Cook also are on the agenda.

Details about who already is coming to Used Car Week can be seen here.

To register, secure accommodations and more, see www.usedcarweek.biz.