The Secrets of Servicing

The ever-present debate and predictions about interest rates often overshadow an essential part of the loan game. Servicing may not generate as many headlines or give talking heads sensational topics to discuss, but it can have a real effect on your bottom line. Here’s how to differentiate the good from the bad of this lesser known yet important financial facet.

For the lender the loan servicer is the eyes and ears for your investment, monitoring things like property tax payments, rent rolls, insurance, and operating statements throughout the term. 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. The last thing one wants to deal with during a crisis is lack of counsel and an inability to get to the decision makers who will determine what can or cannot be done.

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 usually look to the servicer for a recommendation before processing these requests internally. 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.

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