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BLOGS. April 24, 2024

Validate Your Most Important Numbers with a Shadow Servicing Solution

Managing an SBO (Serviced by Others) portfolio can be challenging, particularly when navigating the complexities of partnering with multiple third parties for loan portfolios. Investors and institutions involved in the servicing and reporting on loans, such as master servicers, internal servicers, REITs, etc., use shadow servicing for a range of functions. Without a shadow servicing platform or validation, teams must independently combine data from multiple servicers—each with their own conventions, accounting policies and loan terms—and translate the data into a consistent operation. This practice of compiling information from various sources without validation or a unified “truth” exposes institutions to a slew of errors from miscalculations of interest income to inaccurate application of principle an interest payments. These manual processes can create control deficiency findings on their financial statements due to overdependence on EUCs and lack of independent validation of material financial statement line items. And the lack of controls can lead to expensive audits to independently validate the information because auditors cannot rely on institutional controls.

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