Third-Party Loan Servicing: All You Need to Know

As a mortgage loan lender, are you keen to scale your business and manage complex loan portfolios? According to Fannie Mae, skilled labor shortage is one of the biggest challenges in this pursuit. Add to it the tight regulatory norms—you are already face to face with two biggest issues in the mortgage lending space. Lenders must be meticulous and have very specialized skills to process mortgage loans. The volumes of loan applications and time required to process them make it a key function for cost saving, improving efficiency and reducing TATs. Processing speed also plays a big role in mortgage closing. However, as federal regulations evolve and costs of portfolio management grow, lenders find in-house mortgage loan processing difficult.

Having said this, there are alternatives; have you ever considered third-party loan servicing? Outsourcing partners make significant contributions to the US mortgage market by helping lenders improve costs, optimize processing efficiency, scale operations and address skill shortages. These companies do your heavy lifting so you can focus on loan originations, front-end operations and customer experience.

Are you ready to take charge by outsourcing mortgage loan processing? Here are a few things you need to consider as you identify the right 3rd party loan servicing partner.

Things to Consider in a Third-Party Loan Servicing Provider

Some 3rd party loan servicing providers offer comprehensive services while others offer a combination of specific services. The kind of service(s) you opt for should depend entirely on your requirements and budget. Below is a list of factors that all 3rd party loan servicing providers should prioritize to deliver the best results.

Customizing Credit Decisions

Irrespective of what third-party loan processing companies say, you must rely on your own credit decision rules and data collection systems. You can seek their guidance on ways to mitigate any contingencies or risks.

As service providers, every 3rd party loan servicing company should respect your experience and understanding of borrowers and the mortgage industry. That is why, before you partner with an outsourcing service provider, always ask if they will let you use configurable credit decisions to manage loan processing.

Predicting and Mitigating Risks

It does not help to know when a borrower defaults on repayment. A 3rd party loan servicing provider should be able to study patterns, predict risks and mitigate them. Make sure they use technologies such as artificial intelligence or machine learning for predictive risk analysis.

Your third-party loan processing partner should be proactive and utilize the best predictive techniques to free you from risks.

Staying Up to Date with Evolving Compliance

3rd party loan processing companies should stay up to date with the evolving compliance standards and industry trends. For instance, lenders should be aware of future compliance standards with regards to secure data storage when they gather credit data about borrowers. Third-party loan servicing companies must have software and processes to deal with evolving regulatory compliances.

Communicating Effectively with Customers

As a lender, you may feel that working with a 3rd party loan processing partner could alienate your borrowers. It’s true—automated chats and robocalls make customers feel undervalued.

That’s why customer support teams should focus on two core objectives: to effectively communicate loan defaults and to courteously resolve customer issues. Borrowers should be treated with sincerity and priority must be given to human-first support teams.

It is important to look for a third-party loan processing partner who helps you communicate with your customers effectively.

Ensuring Prompt Collection of Repayments and Defaults

Third-party loan processing partners should use automated schedules to effectively inform borrowers about repayment deadlines and payment defaults until they repay lenders. Time is of the essence in the mortgage loan processing industry. The longer it takes to communicate delays and collect repayments, the more money you will lose as a lender.

Your outsourcing provider must communicate clearly with the borrower and follow-up regarding payments to ensure timely payments and avoid any loan defaults.

The task of choosing the right outsourcing partner is much simpler if you keep these factors in mind at all times during your decision-making process. Providers should be flexible about customizing their services to meet your requirements. They must help you offer the best mortgage loan service to your borrowers.

HelioNext’s mortgage processing services include pre-closing and post-closing audits, mortgage automation solutions and other à la carte offerings. You can choose a solution based on your budget, challenges or requirements. We’re here to help; let’s talk.