Keep a Clean Deal - Do’s and Don’t When Faced with a Tough F&I Deal

‘Get them bought’. These are the words every F&I manager has heard from their GSM or UCM when it comes to making sure that a deal gets done and a buyer gets approval from the lender. Time is money and when they want to move a unit, they know that everything hinges on approval. 

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Picture a busy Saturday that brings a borrower in that has less-than-stellar credit, little time on the job, and not much money to put down. And with new car payments running an average of over $636 per month in Q4 of 2021, this buyer is giving your F&I staff little to work with when it comes to negotiating with an underwriter.

The question is…how do you make this borrower better on paper? Do you just roll with the info you have and hope that sending it to enough lenders will turn up one or two decent approvals with strong buy rate? Or do you consider being a little creative to help increase the odds of a fast approval?

Is There a ‘Line’ and How Fuzzy Is It?

How far is too far when trying to get a deal done in F&I? Is there really an unspoken line you don’t cross when trying to work a complicated deal? F&I is tough enough between selling, compliance, and the constant balancing act with sales to preserve every delivery possible…but knowing what you can and can’t get away with to get the approval can be a bit, shall we say, ‘fuzzy’.

Most would tell you there is indeed a line you don’t cross and that starts with lying on the credit app. For example, pumping up stated income to meet the debt-to-income requirements of certain lenders is fraud, plain and simple. It’s always one of the hallmarks of F&I school…don’t make stuff up.

But what if you were able to uncover more income that the customer is not reporting as part of their application? Child support or alimony could be something missed and completely legitimate to factor in. There is nothing wrong with uncovering this extra monthly income through a skilled interview with the customer. It’s fine to be more complete in income reporting.

Most lenders will say their biggest complaint is borrowers overstating income which will often trigger POI to be provided before approval or with the funding package. F&I staff must be careful not to cross that line either if they suspect the income is inflated as that can come back to bite them if an audit is performed.

Educate Yourself with All Underwriters, OE and Bank/CU

So much hinges on the F&I staff knowing their lenders inside and out. Are they sticklers for POI below a certain FICO threshold? Do they buy deep or are they really looking for A – B paper and little else? Are they more flexible on the so-called ‘character’ factors of approval like time on the job or where the borrower owns or rents their home?

Deals and your creativity with getting them approved become easier when you know your lenders well. No one wants to ask their underwriters ‘Hey, how much can I get away with to get a deal bought?’ but there is nothing wrong with asking what their own policies are for deals that may need a little help. Let them tell you how much they will allow.

Every bank or captive wants to give approvals on every deal and if they have some flexibility in certain areas of underwriting that won’t cause compliance issues down the road, chances are they will be happy to share with your staff.

Do’s and Don’ts to Dodge Trouble

Here are a few tips to stay out of the crosshairs of your lenders…

·  Don’t fudge income - Verify the actual monthly income right away and look for any red flags. Finding extra legitimate sources of income of fine (see example above) but making it up? 

·  Do a thorough interview - Asking all the right questions helps you to avoid being too creative when getting a deal approved. Dig for all the sources of income they may not have thought of when filling out the credit app. Ask for clarification on credit anomalies that can be explained and overcome (after all, there’s almost always a story!). Sometimes a high credit balance may have been recently paid but not updated yet…but you only know this if you ask.

Ask if they can put more money into the deal if the LTV is running too close to what a lender will allow.

·  Do allow a ‘rewrite’ of the credit app -  Sometimes it helps to present the information in a better light if you allow the app to be rewritten (if you use hard copy apps). You’re not writing it for them, but you can help them add missing info or corrected income. Many borrowers are so intimidated by the process that they can inadvertently make matters worse without realizing it.

·  Don’t be bullied by sales staff- You should have at least one lender out there who will help your credit or income challenged buyer without you having to be out of compliance and risk your career. It’s never worth it no matter how much you can make. And make it clear to the sales staff that while you want to make every deal happe, too, you will not compromise your job or ethics to make it happen. If they push, let the GM know. 

And if you are still not sure where to draw the line in your own F&I office, ask your Director or underwriters if you have access to them. They will let you know how to stay on the right side of every deal. 

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If your dealership is looking for more local finance options for your more ‘challenged’ customers, truFinance (powered by truWarranty) can help you find the lenders who are ready to help today.