Today, loan servicers are faced with the headache of tracking and posting trustee payments to their loan portfolios. This is a lengthy process that can take a team of up to 10 people several hours on a weekly or monthly basis to monitor these debtors and their respective default loans. This manual process of linking to the National Data Center (NDC) and pulling the pre- and post-petition payments then manually applying them to the systems of record is inefficient and costly.

Traditionally a single payment will arrive from a trustee, either by mail or electronically. Teams must manually make sense of these checks, by determining the appropriate borrower and the appropriate accounts accurately. The challenge arises when determining how the payment needs to be applied to when it references multiple loans and possibly multiple borrowers. To make matters worse, often there are no posting instructions included with the payments 

When payments are not applied in a timely fashion, there could be several implications:

• First of all, there is the potential to reflect inaccurate information on the periodic billing statement.
• Secondly, the company could start motion for relief activities prematurely because the payment records are not up to date.
• Finally, the servicers cannot recognize potential income until the payment(s) is/are applied, which in turn negatively affects their bottom line. 

Now, if you multiply the number of payments and checks being received by a single servicer, it multiplies the amount of time needed to process, as well as the risk a servicer faces by having a manual process to tracking and map these payments through their systems of record. The likelihood of manual errors, critical information being missed, or taking action on outdated information increases exponentially with the volume of trustee payments to be processed.

So, the question becomes, what can you do to alleviate this pain? There are a few typical responses when faced with this type of situation:

1. Reduce the amount of default and bankruptcy loans being serviced. This is not a practical choice, so this doesn’t make a whole lot of sense, and that is why this problem is such a headache for loan servicers.
2. Increasing head count. An increase of head count has been used to keep up with the increased volume of data validation and payment processing.
3. Partner with a solution or technology vendor to automate this process. 

Having a solution that automates this process is key to reducing risk, and maximizing operational efficiencies.