Do you really understand why subprime and special finance (BHPH) lenders ask for stips? What is a stipulation anyway? For those who dont know, it is a document that verifies a customers statement. Youve heard the phrase, If their lips are moving&hellip-

The tragedy of 9/11 led to the implementation of the Patriot Act, which created the OFAC (Office of Foreign Asset Control). OFAC provides a list of persons known as Specially Designated Nationals. These are people who have been linked to terrorism.

Executive order 13224 of the USA Patriot Act prohibits business entities from doing business with these individuals. Doing so yields fines ranging from $50,000 to $1 million. You are probably already aware that it is in your best interest to check all your customers against the list. So, have you found a means for checking your customers? Or do you think that youre immune and it wont happen to you?

Well, we thought that too, until they arrested the Portland Seven, and one of them was one of our customers. Fortunately for us, it was pre-9/11 that we sold to this customer. Needless to say, we have our system checking every customer against the OFAC list for us, and our dealers.

Now, back to stipulations. Stipulations are more important than ever because of identity theft. Your typical list of stips includes a valid drivers license, valid insurance (with a listed lien holder), pay stub verifying their employment (with YTD income is best), copy of a phone or cell phone bill (providing a phone where the customer can be reached), proof of address (proving they live where they say they live), and of course, references (people who might be able to tell you where they are if they skip). You have two choices: collect the details, send them in, and hope they verify, while your car is driven around-or, actually verify them yourself. This way, when your contract buyers underwriting department goes to verify, you wont have to deal with any surprises.

A valid drivers license is usually easy to check. Your state has a Website or phone number you can call to verify that the license is not suspended or revoked. Insurance is relatively easy to check as well. Just call the agent to make sure they actually paid for the policy and that your buyer is listed as the lien holder. Read the pay stub. Make sure its the most recent, and the income matches the application. Call the customers employer and verify they still work there, job time, and if possible, income. This is typically your biggest deal buster! Home phone bills are usually acceptable, even if they are in a different persons name, as long as they match the address listed on the customers application. Cell phones have to be in the customers name. Proof of address must be a utility bill, or some other mail delivered by the USPS, in the customers name, and to the address the customer put on his/her application. For references, I advise asking for family information with valid addresses.

Be persistent! Get more than you need, and make sure that all the numbers work. Profit margins are tighter than ever! Cash flow is equally as important! It just makes good business sense to do the verification before delivery. It costs more in time and money if you have to fix it later!