LAKEHURST NAVAL FEDERAL CREDIT UNION

RISK BASED PRICING PROGRAM

Signature, new and used auto loans will be underwritten using the current Standard Application Process or through traditional “judgmental” underwriting by a loan officer, if the loan does not pass SAP.
If the loan is approved, it will be categorized into 1 or 4 categories (A, B, C or D.)
The categories are determined by the Beacon Score (Equifax) on the member’s credit report.
Score categories are as follows: A = 670-800; B = 620-669; C = 576-619; D = < 575.
The pricing of the loan (the interest rate) will be determined by the category that the loan falls into based on the applicant’s risk score. If there is a guarantor on the loan, the rate will be based on the primary applicant’s risk score.
Pricing is as follows: A = our “best/standard” rate; B = Standard rate + 1.5%; C = Standard rate + 3%; D = Standard + 5%.
Any loan that is rejected by a loan officer that falls into a B category or above, based on the risk score, will be reviewed by the Loan Manager for additional approval opportunity or reconsideration. If the loan is ultimately approved, it will be priced based on the structure outlined above and the file will be documented as to the reasons for approval.
We will also disclose that the rate on the loan will be based on the member’s creditworthiness.
We will use appropriate verbiage qualifying the interest rates in our marketing and education materials.

Adopted as part of loan policy: 17 Dec 2002 by Board of Directors.

The granting of loans is based on the ability to repay the debt. The guidelines listed below will help to protect the assets of your credit union.

	Proof of income is required for all income listed on the application.
	All loan requests are subject to credit checks.
	Undisclosed debts will be a cause for rejection.
	Your debt to income ratio should not exceed 35% (total monthly gross income X 35% equals maximum amount of monthly payments.)

For Signature, New and Used auto loans, the following applies:

	A. If the loan is approved, it will be categorized into one of four categories (A, B, C or D.)
	B. The Risk Beacon Score, on the member’s credit report, will determine the placement.
	C. Score categories are as follows: A = 670-800; B = 620-669; C = 576-619; D = < 575.
	D. The pricing of the loan (the interest rate) will be determined by the category that the loan falls into based on the member’s risk score.
	E. Pricing is as follows: A = our “best/standard” rate; B = Standard rate + 1.5%; C = Standard rate + 3%; D = Standard + 5%.

For a Signature loan the following applies:

	A. Maximum loan amount 20% of yearly gross income, or $10,000, whichever is lower. Repayment terms 36 months.
	B. Requests to refinance loans will be treated as new loans, and should be for a minimum of $1,000 in new funds.

For new and used auto loans the following applies:

	A. Must have dealer write up, or year, make, model, and serial number.
	B. Will not finance more than NADA guide book for used autos.

Loan and credit card rejections may be appealed to the credit union review committee. Contact the credit union manager to set up an appointment.

Policy updated: 29 Jan 2003