Case Study

Automation Brings Economies of Scale to Shadow Servicing

Client

TBE began as a joint venture by Crown Mortgage Management of the UK and Fortis Bank of the Netherlands and was established to explore new opportunities. TBE then bid on and won a number of mandates to provide the new service for portfolios of securitized debt. One of those mandates tasked TBE with monitoring the performance of a credit card portfolio.

Challenge

MSS TransactionThis mandate provided for the "shadow servicing" of a portfolio containing 500,000-plus credit card accounts. The task involved comparing actual balances to calculated balances and reporting on discrepancies as they could impact investor payments. Initially, TBE's dedicated staff manually reviewed monthly reports and completed individual analysis in two weeks. A steady increase in the quantity of work and decrease in the quality of data pushed errors from a manageable 3 per month to 12 or more. TBE realized that each error was a potential material impact on investors that could result a huge liability and customer relations nightmare. And this challenge became much more urgent when TBE's client cut the deadline for its monthly reports from two weeks to two days.

EaseCap

The EaseCap Response Team was called in to review this escalating dilemma and recognized that the original Excel-based model used by TBE only allowed a simple comparison of data. The process left analysts manually identifying and projecting the impact of anomalies they found which left the work entirely too subject to human error to support the increasing scale of the TBE operation.

Collaboration

EaseCap improvements identified the problems with individual transactions and the impact of errors on the portfolio as a whole - all before the first analyst's review - while assessing probable investor impact and potential liability. EaseCap then turbo-charged the models by consolidating improvements into a system that allowed TBE analysts to easily manage in-depth analysis with the stability required to manage the millions of transactions they would be monitoring each month.

Result

Within its first month of operation, the new system detected 200-plus errors, some of which could have led to serious repercussions. The system was integrated with the existing TBE environment in a relatively seamless transition to what has proven to be a more effective, efficient and impactful management tool for TBE.

Bottom line

EaseCap designed an integrated solution that enabled TBE to work more accurately and faster than ever before - from two weeks to two days with fewer people. The errors captured by the system could have made a material difference in the bond waterfall, potentially costing TBE a drawdown on the portfolio's liquidity facility and maybe even a loss of credibility and confidence with the investors. Thanks to the EaseCap solution, none of the probable crises materialized.

Interactive Reporting

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At EaseCap, we serve the commercial mortgage market.
We get the right information into the right hands at the right time to make the best decision.
Huub Mourits, Managing Director, Structured Finance Services - TMF

"I have been very pleased with EaseCap's transaction management system. The system provides my team with the ability to capture and coordinate input from numerous collateral administrators. The resulting ease of SPV accounting has allowed us to automate the previously manual process of creating and distributing mandatory regulatory reports. This is a high-value performance improvement from our client's perspective - keeping regulators at arm's length enables the clients to focus on investment returns rather than on returning calls and answering letters from regulators."
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