By: Marcus Jones
The recent SS&C Precision LM webinar discussed keeping operations efficient during times of regulatory change. One major focus was using shadow loan servicing as an added layer of control to ensure you receive complete and accurate payment information from third-party servicers. Having an independent set of checks and balances mitigates economic risk and provides great value to any size portfolio.
Industry wide error rates have been reported to be anywhere between 2%-10% on a monthly basis when comparing what is actually collected versus what was expected. An independent reconciliation and recalculation of principal, interest, and other key data points allows for more accurate and complete information; reducing these errors also retains revenue.
From a business continuity perspective, a back-up servicer allows the lender to continue running its operations in the event of a disaster or if one of the third-party servicers is ever unable to service the portfolio.
For institutions that have multiple third-party servicers, they may engage vendors that provide shadow servicing as a service, including data transformation, standardization, and reconciliation/exception management services. In most cases, it is imperative to centralize and consolidate information from multiple sources.
SS&C Precision LM™ is widely used by more than 60 master, primary, and shadow servicers, including leading insurance companies, mortgage REITs, agency lenders, business development companies, banks, and non-bank lenders. Each of these firms face continually changing business challenges and regulatory pressures. It’s imperative to have a nimble partner and a flexible technology platform like Precision LM so you can adapt, respond, and scale quickly and easily.