The American National Standards Institute (ANSI)'s electronic contracting standard for dealership vehicle financing, which was instigated by AFSA and completed last year, is now in its next phase: to ensure acceptance by the investment community.

To meet this goal, AFSA organized a cross-industry task force to create a standard language for establishing specific use and values of key credit criteria terminology used by the secondary capital market. This will enable the terminology to be consistent throughout the securitization process.

Mark Zalewski, AFSA's Director of E-Standards, believes standard terminology will provide the basis for developing risk evaluation models so the market can effectively and efficiently analyze pooled assets that are acceptable to a wide range of investors (see related chart below). "It is widely believed standard terminology may attract additional investors providing efficiencies and flexibility in the capital market," he said.

The task force, lead by Bill Ording, AFSA Vice President of E-Standards, includes representatives from AIG, American Honda, American Securitization Forum, DaimlerChrysler Services, Ford Motor Credit Corporation, General Motors Acceptance Corporation, Bank of America, Bear Stearns, Citigroup, CIT, Dominion Bond Rating Service, Fitch Ratings, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Moody's Rating, Nissan Motor Acceptance Corporation, Standard and Poor's Rating, Wells Fargo, Toyota Motor Credit Corporation, RouteOne, and DealerTrack.

Late in 2004, the task force reached consensus on the core material for a potential new American National Standard. Actual historical data is now being evaluated by the task force to certify that the core common set of criteria are sufficient data elements for use in risk evaluation models.

As the Internet increasingly becomes an integral part of commerce, many business transactions are being conducted entirely in electronic form. At AFSA's 15th Finance Industry Conference for Fixed Income Investors held in May, for example, Nissan Motor Acceptance Corp. claimed 15-second online credit approval and 100% electronic retail sale contracts originated at dealer locations.

Said Zalewski, "We expect to see finance companies to continue investigating ways to eliminate the use of paper security instruments and other loan documentation from the lending process and to adopt wholly electronic alternatives."