Initially, First Investors was hesitant to adopt digital lending technology due
to concerns over how key loan documents, specifically chattel paper and promissory notes, would be managed and controlled. They also questioned whether accepting electronic contracts and promissory notes would be cost effective. These were critical points in light of the volume of other documentation typically required to complete funding of subprime auto financing transactions.
However, there were growing opportunities from several of First Investors’ online loan originator partners who were moving to electronic contracts to create a better loan closing experience for consumers. To support these partnerships, First Investors did not want to miss out on this emerging market and the origination growth created by these partners. Specifically, the company had become intent on purchasing such loans from a leading marketplace lender, which was using eOriginal to manage the financial assets in a fully digital environment.
Spurred by this opportunity, the company committed themselves to conducting due diligence on the process and finding ways to capture business in emerging digital markets.
First Investors funds its operations by borrowing money from warehouse lenders and, ultimately, offering securitizations. A custodian is used throughout the lending life cycle. To operate digitally, the company focused on the ability of warehouse lenders, custodians, and investors to perfect the assets in a portfolio, whether they were retail installment contracts or promissory notes. The legal concept of perfection is critical to ensure security interests are protected against third parties or as it relates to borrower default.
- Eliminated concerns about digital asset management and lending technology
- Elevates trust and transparency in the digital ecosystem, regardless of whether the purchase was a direct auto loan, consumer loan, or any other asset type
- Offers protocol and controls that provide perfection risk and protections
Since it started collaborating with eOriginal, First Investors has looked to increase its purchase and management of loans through its digital platform. This includes working with a leading auto originator to convert its previous paper processes into digital transactions.
The firm also became so confident in the digital lending technology that it was willing to acquire loans from another auto originator that stored 100 percent of its loans using eOriginal.
To date, First Investors has:
- Increased ecosystem confidence in legal perfection of loans acquired
- Expedited access to auto loans originated digitally by partners
- Enabled portfolio acquisition of more than 25 thousand digitally originated loans
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“We view eContracting more favorably than we did a year ago both in terms of perfection risk, as well as how the eContracting process integrates with our operational workflow, but that is specific to eOriginal. We’ve moved our lenders and rating agencies along the learning curve to understand digital best practices and to address concerns around contract control and perfection, and feel like the heavy lift is behind us now.”
– Bennie Duck, Executive Vice President and Chief Financial Officer, First Investors Financial Services