In today's dynamic lending landscape, lenders seeking to secure funding from institutional investors will need more than just a solid business plan. Lenders now face increasingly stringent requirements to demonstrate robust risk management and compliance, particularly as US investment practices gain further traction in the UK market.
Consequently, lenders are experiencing greater demand to undergo comprehensive auditing and verification processes both in the course of securing funding and throughout the lifecycle of a loan portfolio.
Traditionally, these crucial functions have been handled by separate providers, often adding complexity and cost. But what if you could access auditing, standby servicing, and verification, all under one roof?
The keystone point: Verification
For some time, US institutional investors have emphasised the importance of thorough due diligence, going beyond audit and including the requirement for a verification agency to ensure the appropriate management of lending portfolios. Now, as UK investors increasingly work with US and other global investors, verification is becoming the norm on this side of the Atlantic.
This shift reflects a growing understanding that proactive risk assessment and ongoing monitoring are essential for safeguarding investments and ensuring compliance.
The ongoing court case between JP Morgan and fintech start up, Frank, has thrown this issue into the spotlight. While the outcomes of the case are still to be determined, this matter highlights the importance of conducting adequate, thorough and ongoing due diligence for investors and originators of all sizes.
By implementing these measures, lenders can build trust with investors, increase their chances of attracting more favourable terms, and mitigate potential losses.
However, as verification is evolving from "nice-to-have" to an essential component of a successful funding strategy, there is growing frustration over the number of parties involved in ensuring the security and viability of a funding line.
What’s involved in verification
Verification checks provide investors with further peace of mind by verifying that lending items are being managed correctly and in accordance with the agreed upon procedures. This includes reviewing items such as customer information (name, address, email, telephone number), fees, loan amount, APR, signatures and loan term, among other investor specified items.
Required on a draw down basis, verification processes ensure accuracy, identify potential errors in reporting, and mitigate risk for funders by verifying key characteristics of the loan. This ongoing verification instils confidence in investors, encouraging them to continue releasing funds. In essence, verification acts as a vital bridge between lenders and investors, demonstrating a commitment to responsible lending practices. This commitment fosters stronger, more sustainable relationships with investors, potentially leading to future funding opportunities with enhanced terms.
The power of one provider
Traditionally, lenders have had to juggle multiple providers for auditing, standby servicing, and verification. This fragmented approach can lead to inefficiencies, communication breakdowns, and increased costs.
However, Lenvi’s capital markets team offer a better way.
As the only back-up service provider that offers all three services in one place, Lenvi provides a streamlined, integrated solution that benefits both lenders and investors alike.
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Reduced costs and complexity: Consolidating services with Lenvi’s capital markets team eliminates the need to manage multiple contracts and relationships, saving you time and money by working with a servicer who already knows your business inside and out.
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Improved efficiency and communication: With all services under one roof, communication is seamless, and processes are streamlined, leading to faster turnaround times and improved accuracy. If you fall into difficulty or face investor challenge, you only have one organisation to go to, to solve the issue.
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Enhanced risk management: Lenvi's integrated approach provides a holistic view of your portfolio, enabling you to identify and mitigate risks more effectively.
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Increased investor confidence: By partnering with Lenvi, the UK’s leading provider of back-up servicing and the only FCA regulated loan software provider, you demonstrate your commitment to transparency and responsible lending practices, attracting more investors and securing more favourable terms.
Concluding thoughts
In conclusion, as verification becomes the final essential pillar in a capital safeguarding framework, investors and originators alike are looking for one party that can be trusted and relied upon to help mitigate cost and time pressures.
Lenvi's integrated auditing, standby servicing, and verification services offer a powerful advantage, enabling you to navigate the increasing complexity of today’s lending landscape with assurance.
Contact Lenvi today to learn more about how our Capital Market solutions can benefit your business.
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