1.Fiduciary and contractual responsibilities
 

To help ensure that servicers have extensive workout expertise, thorough legal and collateral knowledge and a proven track record in loss mitigation, such parties should be able to demonstrate expertise in the servicing of the underlying credit claims or receivables, servicing should be supported by a management team with extensive industry experience. The servicer should at all times act in accordance with reasonable and prudent standards. Policies, procedures and risk management controls should be well documented and adhere to good market practices and relevant regulatory regimes. There should be strong systems and reporting capabilities in place. In assessing whether “strong systems and reporting capabilities” are in place for non-banking entities, well-documented policies, procedures and risk management controls, as well as strong systems and reporting capabilities, may be substantiated by an independent third-party review.

The party or parties with fiduciary responsibility should act on a timely basis in the best interests of the securitisation note holders, and both the initial offering and all underlying documentation should contain provisions facilitating the timely resolution of conflicts between different classes of note holders by the trustees, to the extent permitted by applicable law. The party or parties with fiduciary responsibility to the securitisation and to investors should be able to demonstrate sufficient skills and resources to comply with their duties of care in the administration of the securitisation vehicle.

To increase the likelihood that those identified as having a fiduciary responsibility towards investors as well as the servicer execute their duties in full on a timely basis, remuneration should be such that these parties are incentivized and able to meet their responsibilities in full and on a timely basis.

2.Transparency to investors
 

To help provide full transparency to investors, to assist investors in the conduct of their due diligence, and to prevent investors from being subject to unexpected disruptions in cash flow collections and servicing, the contractual obligations, duties, and responsibilities of all key parties to the securitisation, both those with a fiduciary responsibility and ancillary service providers, should be defined clearly both in the initial offering and all underlying documentation. Provisions should be documented for the replacement of servicers, bank account providers, derivatives counterparties and liquidity providers in the event of failure, non-performance, insolvency, or other deterioration of creditworthiness of any such counterparty to the securitisation.

To enhance transparency and visibility of all receipts, payments, and ledger entries at all times, the performance reports to investors should report the securitisation’s income and disbursements, such as scheduled principal, redemption principal, scheduled interest, prepaid principal, past due interest and fees and charges, delinquent, defaulted and restructured amounts under debt forgiveness and payment holidays, and should include accurate accounting for amounts attributable to principal and interest deficiency ledgers. The term “income and disbursements” should also be understood as including deferment, forbearance, and repurchases.