Lending Enablement Solutions Create a Path to Auto Ownership for ITIN Holders, Open Lending Analysis Shows

Rhea-AI Summary

Open Lending Corporation (NASDAQ: LPRO) releases data highlighting the creditworthiness of borrowers with Individual Taxpayer Identification Numbers (ITIN) compared to Social Security Number (SSN) holders, showcasing the opportunities for financial institutions in automotive lending.

Positive

• Open Lending's data analysis reveals that ITIN holders have a higher average credit score than borrowers with SSNs, enabling them to qualify for larger loan amounts and afford more expensive vehicles.
• ITIN automotive loans have a return on assets at 3.81%, significantly higher than the credit union system average of 0.75%, indicating the value they bring to lenders.
• The analysis emphasizes the importance of ITIN lending in advancing financial inclusion, particularly in securing vehicle financing for individuals without SSNs, such as nonresident and resident aliens.
• Open Lending's focus on Lending Enablement Solutions demonstrates their commitment to leveraging data and technology to connect with deserving borrowers and promote auto ownership for all.
• The research highlights the popularity of pick-up trucks among ITIN holders, with the Chevy Silverado 1500 being the most popular model, showcasing the role of vehicle ownership in employment and upward mobility.
• ITIN holders are viewed as a low-risk group by financial institutions, further emphasizing the creditworthiness and value they bring to the lending market.

Negative

• None.

Insights

Financial Analyst

The disclosure by Open Lending Corporation regarding ITIN borrowers possessing higher average credit scores than those with SSNs is a noteworthy development for financial institutions. It signals a potential market segment that could be undervalued and underpenetrated. The return on assets (ROA) figure of 3.81% associated with ITIN lending, as reported by the Filene Research Institute, is particularly striking when compared to the credit union system average of 0.75%. This suggests a robust profitability metric that could attract more lenders to consider ITIN lending as part of their portfolio.

From a financial analysis standpoint, this data could lead to a reevaluation of risk models, as ITIN holders may be perceived as lower-risk due to their higher credit scores. Financial institutions might adjust their lending strategies to include ITIN holders, potentially increasing their customer base and interest income. However, it's important to consider the scalability of this segment and the regulatory environment surrounding ITIN lending, as these factors could influence the long-term sustainability of these returns.

Market Research Analyst

Open Lending's focus on ITIN holders reveals a nuanced understanding of consumer behavior within the automotive financing sector. The preference for pick-up trucks among ITIN holders, especially the Chevy Silverado 1500, indicates a demand for vehicles that serve dual purposes—both personal and professional. This consumer insight could guide automotive manufacturers and dealerships in inventory management and marketing strategies targeted at this demographic.

Moreover, the fact that ITIN automotive loans are primarily secured through credit unions underscores the importance of these institutions in promoting financial inclusion. This could incentivize credit unions to further specialize in this type of lending, differentiating themselves from larger banks and potentially attracting a loyal customer base that values community-oriented financial services.

Economic Sociologist

The data analysis provided by Open Lending Corporation extends beyond mere financial implications to touch upon broader socio-economic impacts. ITIN holders' pursuit of auto ownership for employment and upward mobility illustrates the critical role of financial services in facilitating economic integration for nonresidents and resident aliens. This demographic's ability to secure larger loan amounts for more expensive vehicles is indicative of a positive feedback loop where credit access leads to enhanced economic opportunities.

It's essential to contextualize these findings within the broader narrative of financial inclusion and the systemic barriers that non-SSN holders face. The role of credit unions in advancing this inclusion reflects a commitment to serving underserved communities, potentially leading to a more equitable financial ecosystem. While the benefits for ITIN holders and financial institutions are clear, it's important to monitor how expanded access to credit impacts broader economic inequality and social mobility over time.

Borrowers with Individual Taxpayer Identification Numbers have a higher average credit score than those with Social Security numbers

AUSTIN, Texas--(BUSINESS WIRE)-- Open Lending Corporation (NASDAQ: LPRO) (“Open Lending” or the “Company”), an industry trailblazer in automotive lending enablement and risk analytics solutions for financial institutions, today released data on automotive financing access for consumers with an Individual Taxpayer Identification Number (“ITIN”), a federal tax identification number that can be used to access financial services. Nonresident and resident aliens, regardless of immigration status, are issued ITINs for the purposes of filing taxes with the IRS. Supported by findings from the Filene Research Institute, Open Lending’s data analysis highlights how Lending Enablement Solutions break down barriers for ITIN holders while bringing value to financial institutions.

ITIN lending helps make auto ownership and credit-building possible for those living in the U.S. without a Social Security number (“SSN”). According to Filene, it also delivers measurable value to lenders, with a return on assets at 3.81%, significantly higher than the credit union system average of 0.75%. Open Lending has built on this research to show that ITIN holders are a highly creditworthy group, and financial institutions can leverage new technologies to bridge the accessibility gap.

Open Lending’s data analysis found:

• ITIN holders see vehicle financing as an opportunity for employment and upward mobility. Pick-up trucks, which can be used for personal and professional use, make up the top five most popular models among ITIN holders, with the Chevy Silverado 1500 being the most popular.
• ITIN holders have a higher average FICO score than borrowers with SSNs. As ITIN holders have higher average credit scores, they are qualifying for larger loan amounts, hence their ability to afford larger, more expensive vehicles. The higher average credit score also speaks to how ITIN lending financial institutions are viewing them as having a lower risk profile.
• ITIN automotive loans are overwhelmingly secured through credit unions, which underscores their vital role in advancing financial inclusion in their communities.

“We believe everyone deserves the chance to pursue a better life through auto ownership. Lenders can play a major role in opening those doors,” said Kevin Filan, senior vice president of marketing at Open Lending. “Lending Enablement Solutions allow lenders to identify creditworthy ITIN holders who would otherwise be overlooked, and they don’t have to sacrifice a healthy bottom line to do it. When you look beyond traditional measures of creditworthiness, you unlock value and connect with deserving borrowers.”

For over two decades, Open Lending has focused on developing automotive Lending Enablement Solutions that expand vehicle accessibility, proving that data and technology can and should be used to advance financial inclusion. Read the full analysis here.

To learn more about Open Lending, visit openlending.com.

About Open Lending

Open Lending (NASDAQ: LPRO) provides loan analytics, risk-based pricing, risk modeling, and default insurance to auto lenders throughout the United States. For over 20 years we have been empowering financial institutions to create profitable auto loan portfolios with less risk and more reward. For more information, please visit www.openlending.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240222719975/en/

Alison Smith for Open Lending

openlending@ink-co.com

Investor Relations Inquiries

openlending@icrinc.com

Source: Open Lending

FAQ

What is the ticker symbol for Open Lending Corporation?

The ticker symbol for Open Lending Corporation is LPRO.

How do borrowers with Individual Taxpayer Identification Numbers (ITIN) compare to those with Social Security Numbers (SSN) in terms of credit score?

Borrowers with ITIN have a higher average credit score than those with SSN, enabling them to qualify for larger loan amounts and afford more expensive vehicles.

What is the return on assets for ITIN automotive loans compared to the credit union system average?

ITIN automotive loans have a return on assets at 3.81%, significantly higher than the credit union system average of 0.75%.

Which model is the most popular among ITIN holders for vehicle financing?

The Chevy Silverado 1500 is the most popular model among ITIN holders for vehicle financing, highlighting the preference for pick-up trucks.

How do financial institutions view ITIN holders in terms of creditworthiness and risk profile?

Financial institutions view ITIN holders as having a lower risk profile due to their higher average credit scores, making them creditworthy borrowers for larger loan amounts.