In a “hot” backup servicing arrangement, Input 1 is
provided with current data on a basis which is either daily or weekly. Input 1 will
provide validation of data on a basis no less than weekly which includes a complete
listing of all accounts with key accounting data for reconciliation to the Primary
Servicer’s system. This will often involve the execution of a certification
by Input 1 that accurate data has been received.
Input 1 will have additional hardware in the form of servers, workstations and printers
on-site to handle the additional capacity. Additionally, Input 1 will have contracted
with an employment agency or can demonstrate some other ability to acquire any additional
human resources required to assume the servicing on short notice.
Moreover, in a “hot” backup servicing arrangement, Input 1 will traditionally
provide some shadow servicing functions. These functions may take the form of generating
a day’s worth of statutory notifications and shipping them to the trustee
or lender for verification against the live data held by the Primary Servicer or
preparation of a borrowing base certificate on some regularly scheduled basis.
Finally, on-site audits by the trustee, the lender or a third party employed by
the trustee or lender will occur with varying degrees of frequency but usually twice
per year. Additionally, third party consulting firms may be employed by the trustee
or lender to assess the Backup Servicer’s ability to perform its obligations
under the agreement through moderate to extensive due diligence efforts.
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In a “warm” backup servicing arrangement, Input 1 is
provided with current data on a basis which is weekly or monthly.
Input 1 will provide validation of data on a monthly basis which includes a complete
listing of all accounts with key accounting data for reconciliation to the Primary
Servicer’s system. This will often involve the execution of a certification
by Input 1 that accurate data has been received.
Input 1 will be prepared to acquire additional hardware in the form of servers,
workstations and printers within approximately 1 week to handle the additional capacity.
Additionally, Input 1 will be able to acquire incremental additional human resources
sufficient to assume the servicing on short notice. The acquisition of these resources
can take 2 weeks but would not compromise the immediate need to service the transferred
assets.
This arrangement may involve limited shadow servicing functions and are typically
performed only upon request by the trustee or lender.
On-site audits by the trustee, the Lender or a third party employed by the trustee
or lender will occur no more than once per year under this type of arrangement.
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In a “cold” backup servicing arrangement, Input 1 is
provided with current data on a basis which is monthly, every other month or quarterly.
Input 1 will provide validation of data upon receipt, including a summary of key
accounting data for reconciliation to the Primary Servicer’s system. Input
1 will run a totals only report on its own system and transmit this report to the
trustee or lender for verification.
Input 1 will not have any predefined arrangements to acquire additional hardware
or human resources however such requirements must be able to be fulfilled within
two weeks. Under a “cold” arrangement Input 1 is most likely able to
handle the additional capacity without any additional resources or with very limited
additional resources which could be easily and quickly acquired.
This arrangement does not involve any shadow servicing functions by default, however
special requests can be fulfilled.
On-site audits by the trustee, the lender or a third party employed by the trustee
or lender would occur no more than once per year under this arrangement.
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