Servicing companies are big players in the note investing world. National laws allow each individual state to determine their rules & regulations for servicing loans and surprisingly do not always require you to have you loan serviced be a professional company. While it’s possible to service your own loan, I do not suggest it simply because of the time value. Is saving $25 – $50 per month really worth the hassle and liability/risk you’re putting yourself into but servicing itself? Hopefully your answer is no, it’s not. If you do decide to have your loan serviced by a company, the next problem you have to solve is; well, which company do I chose? There are TONS of servicing companies to chose from and each of the vary slightly in price and services but offer essentially the same thing:
- Ability to collect payments.
- Workout the loans (handle talking to the borrower, negotiating, or starting/executing foreclosure).
- Filing & Sending paperwork (TILA/RESPA letters) borrower options, correspondence.
- Keeping payment records from borrower.
- Correctly taking out and holding escrow for taxes and insurance.
I talk with a lot of investors that ask “have you found a good servicing company yet?” and my current answer is, “I’m with _____ right now and I am happy with their results and services, but it hasn’t always been like that.” The truth is, I’ve gone through several different servicing companies and each of them have positives and negatives to their day to day operations and I’ve had to make a switch several times to hopefully find the one that works for me. Some have quick payout times when you’re collecting payments, and I’m able to get my money quickly, but their workout specialist services are not up to par. Or maybe they have lower rates, but do not respond to anything you ask and are terrible at follow up with both the borrower or the client. I even had one servicing company that didn’t send my TILA/RESPA letter but asked for a boarding fee when I was handling the workout! They literally did nothing for me or my loans, but expected their servicing fee. Let’s just say I will NOT be working with them again.
To be honest, there is no perfect servicing company. You’re just going to have to search around and do your own digging. My suggestion is to try working with them on 1 loan initially, actually receiving their services will be the true sign if their company will meet your needs or not. Even with client reviews you’re still going to have to try it out yourself and see if their services or expertise meet your needs. When I was dissatisfied with my last servicer, I asked a fellow colleague about switching to the company I’m currently using (and happy with). They said they had a very poor experience with the company I’m happy with, and that they were making a switch themselves to a new company because of it!
Here is a list of servicing companies. By including them on this list, I am in no way endorsing their company or services. My goal is to make the searching period easier for you by housing them in one location.
- Allied Servicing
- Madison Management Company
- FCI Loan Servicing
- JH Capital Group
When you make your initial contact with them, ask them the following questions about their services; *Also check for their pricing online, if it’s not online ask for the pricing to be sent to you*
- What information is needed from me if I board with you?
- Do they send the TILA/RESPA letters?
- What do they do as a part of their “workout/collection services” do they skiptkace? Send someone to the home of the borrower, or just try to send letters and make phone calls?
- How quickly do they typically see results with their borrowers and when do they file foreclosure if the borrower is unresponsive?
- How fast is the money deposited into my account when I am successfully receiving borrower payments?
- Is there an online portal for me to access my records, borrower payment history, borrower correspondence, etc.?
So start interviewing and hopefully you’ll find the right servicing company for you!