Servicing is essentially a process-oriented job and requires organizational strengths to accomplish the processing within defined time and up to standards expected in the market.
Servicing demands both knowledge and experience—knowledge of the business processes inherent for the asset type involved and experience in handling the same. Experience in the relevant industry for a fair length of time shows the ability of the servicer to provide value addition.
The servicing entity should be organizationally designed to support servicing requirements. At the same time, the organizational structure should keep space for growth and continual updates of the required functionalities. The organizational structure should provide for systems of supervision and review to monitor performance and compliances at various levels.
What type of organizational structure is best suited for efficient servicing organizations? While the question certainly cannot have absolute answers, rating agency S&P feels centralized platforms usually represent a potential for greater economies of scale. Depending on the servicing activity, a combination of transactional and functional departments—e.g., payment processing versus asset/portfolio analysis—usually results in lower per-loan servicing costs. The rating agency feels outsourcing and/or offshoring transactional-based activities (such as bank lockbox and tax/insurance third-party service providers) ...