Jalopnik 
Enter your username and password.
-
posts about #fico more → 
GMAC Resumes Car Loans To Customers With Crappier Credit
Detroit, 2:43 AM
Tue Dec 1
29 posts in the last 24 hours
Tip your editors:
tips@jalopnik.com
Editor-in-Chief:
Ray Wert | Email | AIM
Road Test Editor:
Wes Siler | Email
Weekend Editor:
Murilee Martin | Email
Associate Editor - Houston:
Matt Hardigree
Associate Editor - Detroit:
Ben Wojdyla
Editor-at-Large:
Mike Spinelli
Contributors:
Mark Arnold
John Krewson | Email
Andy Didorosi
| posts about #fico more → |
GMAC Resumes Car Loans To Customers With Crappier Credit |
Original material is licensed under a Creative Commons License permitting non-commercial sharing with attribution.
12/30/08
12/30/08
this is good news here.
12/30/08
Houses are immobile, unlike cars. Houses have land tied to them--even if the house is destroyed, there's still value.
For gross recovery values, a lender usually gets about 70%+ of the value of a foreclosed home (before fees), while a car is usually under 50% (minivans and crappy compacts, about 30%!).
9 times out of 10, a million dollars in foreclosed houses will lose far less than a million dollars in cars.
12/30/08
I would venture to guess there was not a single person at GMAC who believed requiring a 700 was good business practice.
12/30/08
So sometimes the easiest thing to do is just to cut off the lower 20% of your customers (or even the bottom 50%, possibly eliminating 95% of all potential losses) in order to simply keep the ship afloat...and to be able to reduce overhead in loan servicing (such as repos).
The rub is that you might break even, but at least you don't get hit with the massive downside in losses. And the other side of that coin is that when (if) things turn around for the better, your portfolio is not profitable because all your customers are upstanding individuals who never miss a payment.
12/30/08
12/30/08
12/30/08
12/30/08
12/30/08
12/30/08
12/30/08