Organizations need to implement the right servicing strategy to achieve maximum success in today’s environment. Increased regulation and greater customer needs have made choosing a servicing path harder than ever. In fact, it is possible that one dedicated sourcing model may not fit your company policies or requirements perfectly. To help you uncover what is best for you, here’s some of the differences between the two sourcing options:
You can benefit from the expertise and resources of a larger, multifaceted team that you may not otherwise be able to afford. Having access to their experiences and efficiencies on call, when you need them, reduces immediate costs and ongoing overhead. There is no increase to your payroll or software to purchase and learn. But, probably the greatest benefit of outsourcing is the elimination of risk. Loan Servicing in today’s litigious world is hard work and a dangerous place to be without the best resources. A good outside servicer will be aware of, and in compliance with, any and all state and federal regulations. That leaves you free to do what you do best, originate loans.
The main advantages of this option are increased cash flow and better control.
You can develop, naturally, a deeper relationship with your borrowers and lenders. You can make informed decisions quicker, based on your knowledge of a borrower’s payment history, the amount of available equity AND the feedback from your staff. Additionally, keeping a pulse of your loans allows you to plan to re-deploy funds quicker as payoffs are coming in. By putting your lenders’ money to work sooner, you are keeping them happy and maybe funding an extra deal or two.
HOW TO MAKE THE RIGHT CHOICE
Determining the right strategy isn’t easy. Here are some tips to help you make the best decisions.
Define your Strengths and Weaknesses
– By doing this you will uncover the best use of your time and talents.
Determine your Needs – Many Servicing Companies can help you with Loan Processing and Doc Prep, Loan Servicing, Loss Mitigation and Foreclosure Services. Which, if any services, would compliment your strengths?
After evaluating your situation, if you believe that you and your staff can manage and service your portfolio efficiently and compliantly, your choice is clear. If you are uncertain, let me suggest that you consider meeting with a knowledgeable and reputable loan servicer. You may be able to work out a short term program that allows for a “working interview.” Then, after experiencing the process, you can make an educated decision on the best strategy for you.
Additionally, you have a third option that can ebb and flow with your business. You outsource only the servicing functions you feel best fits your strategy. You may want to do your doc prep and processing in-house and have a professional servicer do your collections or vice-versa. The point is you have the flexibility to choose.
Whatever you decide, you have the ability to adjust your path as your situation changes over time and through economic and regulatory shifts. I encourage you to review your situation quarterly and have a standing relationship with one or two qualified servicers to “go to” if needed.
Drew Louis is the cofounder and president of Del Toro Loan Servicing Inc. Drew can be reached at (877) 335-8676.