GAINESVILLE, Ga.-In the wake of Hurricane Sandy, lenders, particularly those in the Northeast, are being cautioned to pay closer attention to the condition of auto loan collateral, especially in looking for signs of flood damage.

Ricky Beggs, VP and managing editor of Black Book, Gainesville, Ga., reminded there are always going to be people who don't play by the rules. "I encourage lenders when they run a history report on a car to pay special attention to see if the car was titled in an area affected by Sandy," said Beggs. "Even if the vehicle does not have any insurance claims regarding flood damage, and even if it has a clean history report, I would do a detailed inspection of that car to check for signs of flooding having reached the vehicle."

Hybrid and electric cars deserve special attention, added Beggs, since flooding can do a great deal of hidden damage to electrical systems.

Beggs believes the auto industry will weed out many of the flood-damaged cars. "No reputable dealer wants to be caught with one of these cars on their lot. They will check out any cars that need extra attention."

Phil Maniaci, SVP of CUDL Automotive, advised CUs to "get old school. Do some title checking in advance. Get a copy of title front and back and make sure it's not a salvaged or totaled title."

The $2-billion NEFCU in Westbury, N.Y., has already assembled its risk assessment team post-storm. One task will be to carefully develop processes between dealerships and NEFCU that guard against a flooded car slipping through, said CIO John De Ieso.

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