Virtus And The Rise Of The Third-Party (Admin Services) Way

The term “loan origination” may conjure banks and financial alchemy, with securitizations slicing and dicing any number of loans into exotic packages that are sold to financially sophisticated investors. The loans themselves can span mortgages, autos and any number of other products.

Regardless of stripe and designation, the fact remains that bank portfolio loan administration has a number of moving parts, with services running the gamut from accounting to settlements to distribution.

And, in an age where companies within the finance realm are learning to do more with less — in terms of manpower, perhaps, or freewheeling budgets, or with an eye on regulatory oversight — more back- and middle-end functions are winding up as the purview of third-party firms.

To that end, Virtus Partners, which focuses on fixed income services, said earlier this month that it has implemented financial software player Misys’ FusionBanking Loan IQ as a platform geared to portfolio loan administration along with full agency services — an installation that the firms said took roughly three months.

In an interview with PYMNTS, Robert Tomicic, cofounder and partner at Virtus, said that general and longer-term trends in the lending market favor third-party services offered from the two firms. Previously, he maintained, such services — back-office ones, such as document tracking — “had been in house,” but banks and their lending operations found increasing need to invest in technology “out of the box … that can also reduce the capital spend” that would be tied to keeping such functions onsite.

The need for full-service offerings has risen, said the executive, as nonbank lenders have been increasingly visible in the market with an eye on becoming loan originators. That sea change comes as financial industry regulations have mandated stricter capital requirements, which means that balance sheets have been tied up so that smaller (and, of course, nonbank) firms have been able to come into the same market.

Tomicic said that choosing Misys came as Virtus was looking for the ability to help new entrants come to market speedily with coverage across syndicated and commercial lending originations — “and with no restrictions on size of the lending portfolio or on the size of the enterprise, from the largest financial institution to the smallest,” said Tomicic. The agency services function as a B2B relationship as Virtus (and now in conjunction with Misys) services include compliance oversight and straight-through processing of loans. For the linkup with Misys, he said, back-office solutions extend to offer robust accounting and loan servicing options.