With so much focus on interest rates in 2019, 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 effect on your bottom line. Here’s how this important financial facet can impact borrowers as well as lenders.
What Servicing Entails
- Oversight of a loan after it closes.
- Upkeep of a loan including cashiering, property inspection, and managing assumptions and transfers.
- Monitoring of loans for symptoms of default.
- Analysis of property operating statements.
- Facilitating property tax and insurance payments.
- Additional 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 that maintain these relationships.
- Lenders rely on the server for a recommendation and processing of post-closing events such as lease approvals, transfers, assumptions or estate planning matters.
- Servicers with deep lender relationships have access to the right person responsible for making critical decisions, saving borrowers time and the frustration of navigating complex organizations.
Importance of Servicing to Lenders
- Servicer with strong borrower relationships can prevent problematic loans and mitigate losses through reporting and consultation.
- Established network of contacts able to deal with issues or requests that may surface during the life of a loan.
- If problems do occur, an experienced servicer should have access to vetted specialists (attorneys, investment brokers, contractors, environmental consultants) who can respond quickly, competently, and in a cost-effective manager