Vetting Your Backup Loan Servicing Partner

A Disaster in Waiting

Choosing the proper loan servicing partner can make or break a company’s success. However, many lenders devote all of their attention to vetting the primary servicer while neglecting to do the proper due diligence on their backup servicer.

Although backup servicers stay on standby most of the time, they are critical to success in case of a problem with the primary servicer. In a trigger event, the backup loan servicer must be able to step in and provide a seamless transition. Lenders can suffer significant losses by using backup servicers without the resources to absorb the additional servicing needs.

Vetting Your Backup Servicer

Even if a backup loan servicer is plan B, plan B may be a lifeline to a lender’s portfolio. With that in mind, the vetting process for backup servicers should be just as robust as the process for primary servicers. Qualifications for which to look in a backup servicer include the following:

Primary Servicing Capabilities

A backup loan servicer should be able to, at any time, have your portfolio data up and running on their systems. In other words, they must take on the primary servicer role with minimal downtime and business interruption. Specifically, look for a backup servicer that is fully capable of stepping in to take over primary servicing responsibilities.

Specialization in Lender’s Asset Classes

Different types of loans have distinct servicing requirements, which require industry knowledge of regulations, nuances, and servicing issues. Aligning backup loan servicers with your asset classes will often produce faster integration and problem resolution, reduced compliance risk, and increased customer satisfaction. Your backup servicer should be able to handle the needs of borrowers across the credit spectrum. From super-prime to subprime to no credit they should be well versed in addressing the needs of all borrowers.

Data, Analytics and Reporting

Storing your data is essential but utilizing a backup with the proper technology can provide additional benefits. A robust platform that provides deep, customized up to date visibility into your loan pool or across your entire portfolio for aggregated data on performance, concentrations and much more can provide valuable insights without the need for your staff to invest the time and resources necessary to provide what you want.

The Paramount Difference: Advanced Hot Backup

With the three qualifications described above, you can be confident in your backup loan servicer’s ability to assume the role of your primary servicer. However, Paramount goes above and beyond the base qualifications to provide clients with unmatched features and performance.

Like a restful API or hot backup approach, Paramount pulls loan data in real time to ensure a seamless transition into a primary servicer role. However, we leverage our industry-leading technology stack to provide valuable data and analytics reporting to investors, lenders, and issuers. Armed with KPIs and advanced analytics, lenders can make real-time adjustments and decisions to their portfolios.

To learn more about the Paramount difference and what it could look like in your loan portfolio, speak to a loan servicing specialist.