How Servicing Impacts You
With so much focus on interest rates, it’s easy to overlook a less-discussed yet essential part of the loan process. Servicing may not generate as many headlines or give talking heads sensational issues to discuss, but it can have a real affect on your bottom line. Here’s how this important financial facet can impact borrowers as well as lenders.
What Servicing Entails
Servicing is the necessary oversight of a loan after it closes. There are numerous tasks required to manage the upkeep of a loan, which can include cashiering, property inspection, and managing assumptions and transfers. A competent servicer will also be able to monitor loans for symptoms of default, analyze property operating statements, and facilitate property tax and insurance payments. Other important considerations include financial analysis and strategic consulting with lenders and borrowers.
Why Servicing is Important to Borrowers
Deep relationships between borrowers and lenders are built over time, and often influenced by their servicing connections. For borrowers efficiency is critical when dealing with lease approvals, transfers, assumptions or estate planning matters. Lenders typically look to the servicer for a recommendation before processing these requests. As a direct point of contact with the lender, the servicer typically has access to the point person responsible for making critical decisions, allowing the borrower to circumvent the burden of navigating convoluted lender directories during crucial time frames.
Importance of Servicing to Lenders
For the lender the responsibilities of capable loan servicer are vital. A competent servicer can prevent problematic loans and mitigate losses through reporting and consultation. A good servicer will have an established network of contacts able to deal with the host of possible issues likely to surface during the life of a loan. If things like payment defaults, legal problems, or deferred maintenance do occur, it’s important to have access to a vetted specialist—attorneys, investment brokers, contractors, environmental consultants—who can respond quickly and competently. Moreover, the cost structure of outsourcing these many services, relationships and resources is generally more cost effective.