Outsourcing Services > Backup Servicing > Requirements and Methods of Service

There are two ways of accomplishing this:

The “Data Only Method”
Input 1 has developed a highly sophisticated insurance premium receivable tracking system that it has licensed to over 125 premium finance companies throughout the United States. This system is used daily by more than 100 staff members at Input 1 in providing the TPA services described above. Using this method, the systems department of the primary servicer, in consultation with Input 1, creates a "data dump" in a standard format readable by the Input 1, of all necessary portfolio data. This data includes such things as customer data (name, address, etc.), transaction data (effective date, total premium, down payment, payment schedule, first due date, amount paid-to-date, status (current, NOITC, CXL, etc), and policy data (insurer, MGA, policy type, effective date, term, premium, cancel terms, etc.) Input 1 then loads this data (periodically) to its own software system. When this is done in a timely manner, Input 1 is always prepared to service the assets using software and procedures without any procedural problems because both the technical and administrative staff at Input 1 is intimately familiar with our software.

The “Servicer Software Method”
The second way to accomplish this is the "Servicer Software Method". Using this method, the Primary Servicer provides Input 1 with all portfolio data, the complete software system currently used to manage it, all software manuals, documentation, and training necessary to operate the software and analyze the data. This method has the theoretical advantage of being easier to implement for the Primary Servicer. However, there are disadvantages for all parties. For the Primary Servicer, it creates the requirement that Input 1 be provided with full system manuals, operating procedures, training and source code, to ensure that the software could be used to wind down the portfolio in the event of a servicing transfer. This method also creates greater issues of confidentiality for the Primary Servicer, because the entire software system including source code is being released to a third party. For Input 1, this method requires that one or more employees must have extensive ongoing training on the software, and any changes to the software or procedures must be immediately learned and documented. For the lender and the rating agencies, this method produces a lower confidence level that backup servicing could be easily implemented in the event of a servicing transfer because portfolio data exists on only one software system instead of two resulting in concentrations and other critical borrowing base data not being reconfirmed regularly on a second system.

Because of the reasons described above, it is our experience that lenders strongly favor the employment of the "Data Only Method". In our experience, the Servicer Software Method may be acceptable if it can be confidently demonstrated that sufficient documentation and training can be provided to Input 1 so that independently-verified portfolio data and borrowing base calculations can be readily available to the lender.

Input 1 is able to discuss both options with prospective customers in an attempt to come to the best conclusion for all involved.

Backup Servicing options:

1. Requirements and Methods

2. Service Options