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Across the value chain, inefficiencies today include:
- Origination and underwriting of underlying loans: long lead times; lack of data. standardization (contract terms, credit profiles, collateral); highly paper intensive; decentralized information and storage; costly to access and reconcile data.
- Security structuring: complex, manual and costly processes to evaluate, rate and pool loans, which is often duplicated across multiple parties; slow, opaque and manual settlement processes.
- Trading: except in certain MBS, relatively shallow over-the-counter markets, with constraints in liquidity and significant market information asymmetry.
- Loan servicing: manual process to monitor and collect payments; limited insights offered to investors; fragmented account management.
- Security servicing: costly due diligence and research due to absence of single source of truth; time lags leading to out-of-date or imperfect information; manual/slow reconciliation (time lags between loan payments and investor distributions).