How Loan 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. Loan 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. The following is a
summary of what makes loan servicing so important.

What Loan Servicing Entails
Loan 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 inspections, managing assumptions and transfers, as well
as property and borrower level financial analysis for lenders. A competent
servicer is also equipped to monitor and facilitate tax and insurance payments
as well as funded reserves for tenant improvements, leasing commissions,
capital items and any other reserve(s) required by a lender.

Why Loan 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 and 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. It is a
benefit for a borrower to have a local regional servicing department to rely
on. This can give the borrower a close touch point (regionally) for customer
service.

Importance of Loan Servicing to Lenders
For the lender, the responsibilities of a 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.

Dan Friederberg
President
danf@slatt.com