Loan Servicing: Parting is Such Sweet Sorrow
By BJ Bounds
Customers often develop long-term relationships with their financial institutions. If you’re a community-minded organization, those customer relationships are extremely significant.
Your customers aren’t nameless, faceless numbers on your balance sheet. They’re a part of the communities you support and the reason you exist.
Efficiency during the process makes you and your customers even happier. If you’re using a loan origination system (LOS), you’ve already discovered the efficiency that naturally comes from technology developed just for your business.
Efficiency can help you close more loans quickly. However, if you’re not servicing the loans, you must part ways with your mortgage customers after closing, breaking a perceived bond. But to take the same bonding efficiency beyond closing is as simple as using the right technology.
Servicing your mortgages allows you to retain customers for the life of their loans and to maintain the level of service and community spirit that keeps them coming back. Your best income opportunities will come from servicing and the opportunities for revenue that result from keeping your customers.
These opportunities include refinance options, interest income, cash flow from block sales to large investors, and possibilities with the “scratch-and-dent” process of turning around non-performing loans.
Some of the most common concerns for servicing are the most significant in terms of federal regulations. Often the prospect of maintaining taxes and insurance for at least one year on Section 35 loans is daunting and enough to make giving up your customer seemingly more acceptable.
Simplicity and efficiency are paramount features for any loan-servicing system. If you’re servicing loans and need a more efficient method, or you’ve just made the decision to start servicing, there are system features you should consider to select the best system for your business:
Make sure your new system includes the required forms and documents for your customers. These include 1098 year-end statements, hello and good-bye letters, and accurate escrow administration. Section 35 loans are no longer a barrier.
Safety & security
As a financial entity, you must protect the integrity of your client’s sensitive data. Look for a server system with redundancy and reliable backup processes in place.
Technology being as advanced as it is today, you shouldn’t be required to purchase additional hardware to get started in the servicing arena.
Also look for a servicing solution that doesn’t penalize you for adding staff, but instead charges you per loan.
Look for a system that uses minimal resources and is easy to use—ideally a small desktop application that works with your current LOS system and processes.
You’ll want staff to learn quickly how to generate additional income.
The market changes, and you must constantly react to the ebb and flow of market conditions. Your servicing solution should be just as flexible to react with you and adjust to your needs.
You may need a full-service solution, or merely a web-based system that your staff can manage.
Doing what’s right for your customers is what separates you from the larger, impersonal institutions. It’s also what draws customers in and keeps them coming back.
If you’re giving them up after closing, you’re doing yourself and them a disservice. Servicing your own loans is one more way to provide your community with continuing service and support. With the right servicing solution, you can keep your customers—and their trust.