A real estate loan servicer is a company/person that is tagged in after closing by the lender to handle the administrative aspects of a loan. Surprisingly, many mortgage companies and owner finance lenders do not service their own loans but hire a third-party company to serve as a liaison between themselves and their borrower, ultimately managing the loan.
There are many companies who specialize in servicing real estate loans, and they often offer an array of services. The type of loan you have, and the lenders needs, will determine what services are opted in to. Often the fee associated with the management of the loan is written into the closing documents and passed on to the borrower.
Finding a loan servicer you can trust, and one that fits your needs is imperative. Always read the fine print and be sure to have a clear understanding of your servicing agreement. If you operate nationwide, be sure to find a servicer that does, too. Remember that not all servicing agents are created equal. Some are very specific on the types of loans they can service while others are a one-stop shop.
As a lender there are many things you must stay on top of for things to run smoothly. Your servicer is there to make sure nothing is missed. Depending on your need and/or terms agreed to at closing you may expect your loan servicer to keep track of the following:
|Accepting borrower payments||Collecting fees|
|Keeping track of loan balances, amortization schedules, and records of payments||Sending out late notices and acceleration/demand letters|
|Collecting escrow for taxes and insurance||Managing extensions|
|Paying taxes and insurance||Providing payoff’s|
|Releasing draws||Serving as the main point of contact/interfacing with the borrower|
Servicing a loan is not only time-consuming, but one must know how to navigate through the legalities and compliance issues that may arise. Laws vary from state to state and can change over time. Often there are strict rules and timelines when it comes to collections, notifications, etc. and your servicer will help you stay on top of it all. If you are going to finance the sale of a property yourself, a loan servicer is necessary to ensure everything is done legally and correctly, and protects both the borrower and the lender.