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The Benefits of Perfecting Loan Collateral

As the lending and servicing environment gets increasingly competitive, loan servicers are looking at ways to decrease their servicing costs and maximize their gain on loan transfers.

At a webinar on how perfecting loan collateral can increase the portfolio value of servicers, Danny Byrnes, VP of Sales and Marketing at Nationwide Title Clearing, Inc (NTC) and Jeremy Pomerantz, VP of Business Development at NTC, gave insights into the challenges and best practices associated with perfected or complete collateral.

Explaining the considerations and challenges in loan sources, life of loans documentation, and variable storage considerations, Byrnes and Pomerantz said that loan source documentation was important across almost all categories, whether it was branch/wholesale and retail, broker correspondent loans, flow or bulk acquisitions, or sub-servicing.

However, lack of proactive data capture, image conversion issues, dual tracking, inconsistent tracking reports, and reconciliation discrepancies were just some of the challenges that servicers faced while compiling and auditing loan source documentation.

Looking at the life of a loan, it was important to consider documentation related to origination, servicing transfer or subservicing agreements, loss mitigation, bankruptcy or foreclosure, and paid in full or maturity of a loan. However, challenges such as missed deadlines associated with servicing transfers, foreclosures, and paid in full loans, as well as reactive collateral remediation led to increased costs for servicers.

Today, though servicers could solve these documentation issues through an all-inclusive final documentation program that combines critical document audits, document level tracking, and effective document chasing to give a complete collateral.

According to Byrnes and Pomerantz, each component of complete collateral helped servicers stay one step ahead by creating a virtual collateral file that retains almost all information related to a loan including document level shipment, established audit criteria, critical findings, and invalidated false exceptions that were reported early.

A complete collateral also helped in effective exception management and consistent custodial reconciliations. The speakers concluded the webinar by looking at the downstream benefits for servicers, saying that buying and selling of loans, portfolio values, and loan disposition, all benefited with a complete collateral.

Click here to view the full webinar.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. She can be reached at Radhika.Ojha@DSNews.com.
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