The Value of Loan Servicing
Prior to COVID, the value of loan servicing had been easy to overlook and was often a less-discussed yet essential part of the loan decision process. In a normal environment, loan servicing does not generate as much interest to our borrowers, but it becomes a valuable service when you need it. When the COVID crisis hit back in March 2020, loan servicers experienced a large number of requests from borrowers wanting to have a dialogue with their lender. This is when the value of loan servicing became very important to our customers. Here’s how quality loan servicing can impact borrowers as well as lenders.
What Loan 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.
- Processing service requests for borrowers
- Additional considerations include financial analysis and strategic consulting with lenders and borrowers.
Why Loan 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 servicer for recommendations on and processing of post-closing events such as lease approvals, transfers, assumptions, and estate planning matters. This includes unplanned events like the COVID pandemic to help provide a dialogue of communication and guidance on how the lender should process requests and what information is needed.
- Servicers with deep lender relationships have access to the key people responsible for making critical decisions, saving borrowers time, and the frustration of navigating complex organizations. This is particularly important when an event like COVID generates a portfolio-level impact that overwhelms lenders. Fortunately, Slatt Capital’s servicing team is able to provide our borrowers with guidance and advice on how their lender would look at a specific request or need.
Importance of Loan Servicing to Lenders
- Servicers with strong borrower relationships can prevent problematic loans and mitigate losses through reporting and consultation.
- Servicers have an 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 has access to vetted specialists (attorneys, investment brokers, contractors, environmental consultants) who can respond quickly, competently, and in a cost-effective manner.