There are three main types of 3rd party loan servicing solutions that you will likely come across in your search for a partner – 3rd party branded, co-branded, and private label. The branding that borrowers see when managing their loan is the distinguishing factor between these services.
With third-party loan servicing, your servicer handles the day-to-day tasks on your behalf – like collecting payments, following up about delinquent accounts, collecting borrower data, and answering questions. In turn, you collect the income generated and pay the servicer a fee. However, each option has its own blend of benefits and drawbacks that you need to fully understand before committing to a solution.
3rd Party Branded Loan Servicing
With 3rd party branded loan servicing, the servicer’s branding is displayed across most types of customer communications, and there is generally very little to no use of your own company branding. From the borrower’s point of view, their loan “moves” from the lender to the servicer. The borrower also receives statements with the servicer’s branding, logs into the servicer’s website to make payments, and contacts the servicer’s team directly with any questions.
Some lenders choose 3rd party branded servicing because it is oftentimes the lowest cost option.
Co-Branded Loan Servicing
Co-branded loan servicing is a middle ground between 3rd party branded and private label servicing. This option provides a unique “hybrid” borrower experience that allows the servicer to handle servicing tasks on your behalf, while letting your borrowers know you are still involved.
With co-branded servicing, the borrower logs onto the servicer’s portal, where they find both your branding and the servicer’s. When they have questions, the servicer’s customer support team answers them using their own branded email address or phone number.
This type of loan servicing keeps your customers engaged with your brand throughout the life of the loan, so they don’t feel like you completely sold the relationship. It can help promote borrower loyalty and retention by showcasing your involvement with their loan, while also allowing your chosen servicer to handle the day-to-day servicing tasks.
Private Label Loan Servicing
Private label loan servicing – also called white label – is only offered by select servicers. This option allows your branding to be front and center on customer communications, while the servicer remains behind the scenes as they handle the servicing of the loan.
With the private label option, the borrower’s portal is found on your own branded domain, the borrower sees only your branding on statements, and the customer service team uses your brand name or a generic name when fielding calls and answering questions. The ultimate result is the borrower feels that your company is handling their relationship.
At certain times in the borrower relationship the servicer will identify themselves, such as during a delinquency work-out. This is necessary because it is important the borrower knows exactly who is working with them on these important arrangements.
Private label loan servicing can help your borrowers feel connected to your company, even though a 3rd party is servicing their loan. This type of servicing also keeps your name in front of borrowers when they check their balance, make a payment, or ask a question. In this way, private label servicing promotes long-term borrower relationships and keeps your company top-of-mind when borrowers need additional services.
Choosing Between Types of Loan Servicing
The right type of loan servicing solution for your company is often a matter of budget and preference. As you can imagine, establishing procedures, customized interfaces, and training employees for private-label loan servicing is an involved process. Due to these additional requirements, it tends to be the most expensive of the available options. On the other end of the spectrum, 3rd party branded loan servicing is typically the most economical option and co-branded lies somewhere in the middle.
As far as preference goes, you know your company and your borrowers best. If you believe that keeping your name in front of borrowers will lead to greater profitability – consider co-branded or private label servicing. On the other hand, if you want to keep costs low while providing excellent experiences for borrowers, 3rd party branded servicing could be the right choice.
No matter which solution you choose, you need the right servicing partner to implement it. Your partner should offer outstanding customer service and flexible solutions to meet your needs as well as insightful data and an effective loss mitigation program. Finally, look for a firm with the industry experience to support your success.
Discuss Your Loan Servicing Needs with The Experienced Team at AmeriNat
At AmeriNat, we offer 3rd party branded, co-branded, and private label solutions which are customizable to meet your needs. Our team can answer your questions about the types of servicing available and help you choose the right option for your company.
To learn more about our loan servicing solutions or to discuss your unique needs, contact a member of our team today.
