To understand the importance of loan servicing we should first define what it is.

Loan servicing is the administrative side of a loan. It involves receiving, applying and disbursing payments to lenders or note holders, sending appropriate notices, monitoring the status of liens and maintaining adequate insurance coverage. It even includes coordinating foreclosure proceedings should they be necessary.

So what?

In the case of individual mortgages, private lenders and note holders have to decide if they handle loan servicing themselves or if they commit to a relationship with a loan servicing agent.  Loan servicing agents can provide a tremendous when agreeing to allow a service agent collect on a loan or note on their behalf.

If not just for peace of mind, it is an effective means of collecting when there is an expert third party provider involved.

Some of the basic responsibilities that can be fulfilled include:

  • Billing the borrower,
  • Collecting monthly payment,
  • Disbursing payments,
  • Providing monthly statements and interested earned,
  • Maintenance of payment records and issues form for tax purposes,
  • Provides customer service communications to the borrower and lender,
  • Starts foreclosures in the even of a default or where a workaround is not an option,
  • Schedules legal counsel to assist in foreclosure processes.

Having a loan servicing agreement in place is beneficial because it relieves lenders from the administrative responsibility and maintenance of the loan, removes them from being a direct source of loan agreement enforcement and allows the loan servicing agents resolve customer service issues of borrowers while dealing with compliance hurdles.

Is this all feeling like an uphill battle?

Change can definitely feel like an uphill battle for any process and in any size of organization. Ultimately, emerging innovation and compliance only serves to benefit all parties involved.

Check back regularly throughout July as we focus on providing an understanding of the value and strength in successfully managing the delicate balance between sometimes opposing components of business. Together, we’ll be sure you find success and, consequently, the competitive advantage.