By Nasser Ansari
Director, Product Management, Wolters Kluwer’s Lien Solutions
UCC filing is the cornerstone of all loans and every lien portfolio. But a UCC is not a static document. On the contrary, it’s a dynamic document that can (and will) undergo many changes throughout the life of the loan.
Effectively managing a lien lifecycle can mitigate your exposure to additional risks, protect your assets and your place in line among secured creditors, and lead to a more accurate and productive workflow, enabling you as the lender to make the best use of resources.
There’s no such thing as an insignificant change to a UCC filing. Even the smallest modification or error can impact your standing and security as the lender or lessor. A person or a business can move, an individual can get married and take on a new last name, a business can take on a partner, a debtor can lose their good standing, etc. The list of potential changes is nearly endless.
While it would be nice if the debtor would alert you to these changes so you can update your filings, in reality, it doesn’t happen. The responsibility, therefore, rests on you, the lender or lessor, to make sure you have the proper, up-to-date information on your debtors.
Keeping Tabs on Your Portfolio
Most lenders have thousands of outstanding loans and leases. How can a firm keep constant track of all of them and update each in a timely, accurate and cost-effective manner? One potential solution is to partner with a third party that can provide debtor and UCC monitoring solutions. A monitoring solution can turn this labor-intensive, time-consuming chore into a simple automated task. These solutions can help lenders perform lien management duties in a fraction of the time and ensure greater accuracy.
To avoid constant information overload and not affect staff productivity, an automated system will allow you to set pre-determined monitoring parameters and receive alerts according to those preferences. Automated debtor and UCC monitoring is a key first step in establishing a well-run, orderly lien management process. It reduces risk, improves filing accuracy and boosts staff productivity.
The benefits of using an automated monitoring system are clearly identifiable and measurable. Lenders using such a system receive regular alerts each tied to a change detected in one of their filings. This gives the lender ample warning and time to make the needed corrections. Filing accuracy is improved and risks are mitigated. Furthermore, an automated monitoring and alert system takes away a major lienholder pain point – resource allocation. Having an automated system frees a lender’s staff from having to perform this task manually, letting them focus on other mission-critical duties and boosting workflow efficiency.
Don’t Let it Lapse!
It’s been said that all good things come to an end. That includes UCC filings. A UCC filing has an expiration date, but its life can be extended… if the lienholder takes proper action in time. Failure to file a timely extension (continuation) results in the UCC’s termination, which means the lienholder is no longer protected.
As mentioned, successful lenders will typically have a sizeable portfolio of outstanding liens. Manually monitoring them for any changes is a difficult enough task. Ensuring that you are aware of pending filing expirations beforehand so that you can take timely action is another time-consuming, labor-intensive chore. Letting a filing lapse into termination revokes the secured-lender protection and increases risk.
As with monitoring, an automated solution can help prevent a filing from being accidentally allowed to lapse. An automated continuation solution scans a lienholder’s filings, providing timely alerts on upcoming expirations and automatically files continuations on the lender’s behalf and alerts the lender about any up-for-renewal filings requiring manual attention. Workflow efficiency is also boosted as staff and hours once devoted to continuations can now be used in other key areas of need.
Letting Data Tell the Story
When you can view data on your portfolio, key decision-makers and stakeholders can receive reports on a periodic, adjustable basis, or made “on the fly.” Reporting allows them to identify trends in a timely fashion and gives them a chance to plan strategies to best take advantage of a trend or to mitigate any problems before they occur. For example, a filing report can summarize your filing operation is a multitude of ways. It can give you high-level trends to very granular details of each parameter of the filings you have done. Key Performance Indicators (KPIs) that give valuable insight into risk potential, portfolio quality, workflow efficiency and operational effectiveness can be considered, and, using these KPIs, a lender can choose data sets based on their specific criteria of need and timeframe.
With such a system in place, a lender gains more control over accuracy and risk, as well as a greater understanding of where potential problems may exist in their process from a quality standpoint. The lender also has the knowledge to solve these problems in a timely manner before they negatively impact its portfolio and the bottom line.
Key Insight into Perfection Risk
Studies of typical large lenders’ portfolios reveal that up to five percent of their UCC filings may have perfection issues, putting that lender at risk. Unfortunately, many lenders have no way to get actionable information on these filings. Or, if they have a way, it’s not cost-efficient. That means that information is essentially invisible to them and lurks as a constant risk to their portfolios.
Understanding your portfolio, being aware of potential risks (like a debtor name mismatch) and proactively taking proper preventative action ahead of time are the key elements in a sound lien management program. Third-party partners can be a big help in this regard. Using a third-party lien analytics solution, a lender can look at their portfolio from a high level, as well as drill deep down to view each individual component of their process.
Tracking Inside –and Outside– Your Sphere of Influence
When outside, non-lending parties such as law firms or outside counsel file a lien on your behalf, the liens may be hard to find and track, and as a result, their impact on a lender’s loan portfolio, or can be overlooked or missed entirely.
Aligning a visible portfolio with other filings found in public records can allow a to have all of their liens – ones filed directly by them as well as those filed on their behalf – in one place, so that all may be managed together, at the same time, from one centralized place. Nothing is left outside to potentially slip through the cracks and increase risk.
Bringing It All Together
End-to-end lien management is a very detail-oriented process. As with anything requiring attention to detail, the chance for error slips in. However, automated, web-based systems provide a cost-effective, error-free means to reduce risk, increase accuracy and enhance a lender’s lien management program.
Automated, web-based lien management can empower a lender to see an entire loan portfolio from many different angles. Such capabilities offer the lender the ability to see trends or problems well in advance and take appropriate action ahead of time rather than to simply react after the fact and hope for the best. Most of all, a lender has all the tools and knowledge at his or her fingertips to make informed decisions rather than guess or assume. And that’s what secured lending is all about.
Nasser Ansari is the Director of Product Management at Wolters Kluwer’s Lien Solutions.
In his role, he is responsible for Core Products and Platform Strategy for the Core UCC products
Nasser has extensive experience in Technology and Product Management roles in Enterprise Software industry.
He has a Masters in Electrical and Computer Engineering from Ohio University and an M.B.A. from Kellogg School of Management, Northwestern University