WASHINGTON-NCUA outlined the strategic, transaction, and credit risk red flags CUs should be watching for with indirect lending programs.
Strategic Risk Red Flags:
* High program exposure with no concentration parameters
* No portfolio credit quality standards
* High maximum LTVs
* Inadequate staffing, program analysis, and board reporting
* Unusual trends (i.e., high ROA)
Transaction Risk Red Flags:
* Inadequate segregation of duties
* Lack of internal controls for loan documentation/funding, credit reports, dealer reserves, and lien placement
* No follow-up procedures
* Improper incentive structures
Credit Risk Red Flags:
* Inadequate review of underwriting
* High default rates
* Insufficient loan documentation
