As your loan portfolio grows, the question arises – does it make sense to service loans in-house or partner with a third party? Many lenders find that a third-party loan servicer can provide better customer service at a lower cost – particularly for complex portfolios.
An effective loan servicing partner will provide excellent borrower service and tools that improve performance. To find the right servicer for your organization, consider the following 6 factors when interviewing potential partners.
1. Level of Borrower Service
Borrower satisfaction should be the primary goal of any loan servicer – whether in-house or third-party. At minimum, a third-party servicer should treat your borrowers with the same care and attention that they receive from your company. This high level of customer service is vital to protecting the reputation you’ve earned from your borrowers.
As you evaluate servicing partners, check their online reviews and testimonials to hear from customers and their borrowers – in their own words. Pay close attention to key factors that can influence the borrower experience, like the ease of self-service platforms, experience with customer service staff, complaint resolution issues, and the length of time it takes to answer borrower questions. What is their overall customer service rating and how does it compare to others in the industry?
2. Ability to Retain Borrower Relationships
Using a sub-servicer provides optionality throughout the life of a loan – allowing you to control the customer relationship for decades after loan issuance. A servicing partner that supports sub-servicing recognizes your relationship with your borrower and operates in accordance with that. They will welcome and be responsive to your portfolio goals and loss mitigation objectives.
Your servicer is still responsible for servicing your loans in compliance with regulations and laws. Make sure you have a good description of their audit and compliance program. For example, do they obtain a Uniform Servicing Attestation Program (USAP) audit or a SOC 2 examination? Are these reports available to you?
3. Co-Branding and White Label Servicing Options
Co-branding is a feature that can smooth the borrower “handoff” after loan issuance. With this type of servicing, your borrowers can see your name and brand on documents throughout the life of the loan relationship.
You may also want to consider white label loan servicing – also known as “private label” – which puts your logo and messaging in front of borrowers when they log in to the self-service portal, review their statement, or call with questions. When your borrowers see that you are still front and center in their relationship – and their experience is seamless – you will have more control over borrower satisfaction and will likely maintain an important advantage the next time they need your services.
4. Availability of Reporting and Borrower Insights
Your loan servicer should do more than collect payments on your behalf. They should also track borrower information and portfolio performance, distill it into easy-to-understand reports, and provide actionable insights into your loan portfolio.
Data from your servicer is key to identifying risks to your portfolio – like borrowers likely to miss payments or default. This data can also help you identify opportunities to enhance the customer experience, improve operational efficiency, cross-sell to current borrowers, and strengthen your portfolio. With robust data and the technology to provide actionable analytics, your servicer can help you turn opportunities into profits.
5. Effectiveness of Loss Mitigation Program
A loss mitigation program is essential to loan servicing offerings, and the goals and outcomes can vary dramatically between servicers. Some loss mitigation tactics focus on collecting overdue payments, while others focus on preventing defaults before they happen. Your loan servicer should do both.
An effective loss mitigation program combines data analytics with diligent collections activities to help manage default risk. Analytics can help forecast which segments of your business are most likely to result in losses, so you can adjust your portfolio accordingly.
To evaluate a prospective servicer’s loss mitigation program, ask about their goals and understand how they align with yours. Then, ask about past results and how individual portfolio challenges were overcome. Finally, look for references or testimonials from other lenders to verify the loss mitigation program stacks up to its billing.
6. Experience to Help Avoid Common Pitfalls
The value of experience in loan servicing cannot be overstated. Your loan servicer should help you avoid pitfalls and navigate changing economic conditions, but they can only do that with substantial first-hand experience.
A loan servicer with a lengthy track record will have experienced varied interest rate cycles, periods of economic growth and recessions, and navigated significant shifts in compliance requirements. They will have also worked with hundreds of lenders and have learned from their successes. You can leverage this experience to support your own success and avoid common missteps.
Experience is also the key to honing top-notch processes that support your borrowers and help you minimize risk. In fact, experience is the thread that connects all six of these factors together, and that’s why you should seek a servicer with a lengthy track record of success.
AmeriNat: Experienced Loan Servicing to Support Your Borrowers and Your Bottom Line
At AmeriNat, we combine all six of these key loan servicing features to create an unparalleled experience for lenders and their borrowers. We have been providing high-quality loan servicing since 1975 and are trusted by lenders across the nation to service more than 50,000 loans with a principal balance of $11 billion.
The AmeriNat team has worked with many types of loans and in various economic scenarios, so we have the experience and technology to guide your borrowers throughout the life of their loan.
To learn more about loan servicing with AmeriNat, contact us today.