Paper Offers Actionable Steps To Leverage CECL as a Competitive Advantage

Black Book, a division of Hearst that provides industry-leading used vehicle valuation and residual value forecast solutions, announced today a new educational white paper: “Analytic-Driven Data Helps Auto Finance Lenders Mitigate Risk & Become CECL Compliant”. Click here to download the white paper.

The Financial Accounting Standards Board (FASB) is looking to ensure that financial institutions have solid measures in place to ensure they have appropriate reserves for any future losses based on the life of each auto loan. As a result it has instituted its new Current Expected Credit Loss model (CECL). This will require higher levels of loan loss reserves and lead to changes in lending practices and portfolio management. It will also require a significant amount of data capture, analysis and modeling to meet the implementation deadline of December 15, 2019.

With CECL’s requirement that lenders perform life-of-loan loss forecasting, as soon as a lender says yes to a loan, it must begin reserving for potential losses on that loan. This means each lender must have a much better understanding of the borrower’s financial condition, as well as accurate historical and residual collateral insight, when they make the loan.

The Black Book white paper discusses how auto finance lenders have the opportunity to rely even more on having the most accurate and up-to-date credit and collateral data on their portfolios in order to meet these new requirements.

“Auto finance companies can leverage this opportunity to convert this compliance need into a competitive advantage,” said Anil Goyal, Executive Vice President, Operations for Black Book. “By leveraging granular data and building loan-level analytic models, auto lenders will have a better understanding of risks and improve return on capital.”

 The white paper also addresses the following topics:

• ·       Probability of default methodology
• ·       Estimations of probability of default and loss given default with model samples
• ·       CECL modeling and data readiness
• ·       CECL’s Effect on Loan Strategies
• ·       How varying economic scenarios can impact lender strategies for CECL

Click here to download the new white paper: “Analytic-Driven Data Helps Auto Finance Lenders Mitigate Risk & Become CECL Compliant”.

About Black Book

Black Book® is best known in the automotive industry for providing timely, independent and precise vehicle pricing information, and is available to industry-qualified users through online subscription products, mobile applications and licensing agreements. Since 1955 Black Book has continuously evolved to ensure that it achieves its goal of delivering mission-critical information to its customers, along with the insight necessary to successfully buy, sell, and lend. Black Book data is published daily by National Auto Research, a division of Hearst, and the company maintains offices in Georgia, Florida, and Maryland as well as the Canadian Black Book in Toronto. For more information, please visit BlackBook.com or call 800.554.1026.