I was at an annual servicing convention and got to spend three days with many of my favorite people. We caught up on each other’s lives and we talked about an industry that many of us have been in for decades. A recurring theme among many of my colleagues in the lending business is they have servicers with whom the relationship has fizzled and performance is subpar. Sometimes it happens because volume is too low to warrant the servicer’s best efforts. Other times the romance wanes because all parties have become complacent. There are also instances where the servicing shop has just plain lost its way. Either way, to quote Conway Twitty and Loretta Lynn: “…there’s nothin’ cold as ashes after the fire is gone.”
The frustration for the owner of the loans is that they structured their business to rely on outside servicers and when servicing falls short the work remains. Why don’t more lenders just cut loose underperforming servicers? As a former head of servicing in a life company lending shop I can say that sometimes you still get occasional benefits that make letting go difficult: a nice juicy loan from their mortgage banking team, a compliment (“have you been working out?”) or a fruit basket at the end of the year. But the rest of the time you just get neglected. For lenders that use as many as 50 servicers it often happens among many of servicers at once and with many, many loans…and it can be deflating.
So, what are the options? If the relationship has diminished to an unsigned Christmas card with a company photo you can cut the servicer loose and transfer servicing to a better firm. If the new loans keep dribbling in but service is poor the lender can transfer the loans to a better servicer with the requirement that the original servicer be allowed to keep some of the servicing fee and stay in the deal but with reduced responsibilities (a great option when the origination side wants to stay in front of a valued customer). Yet another option is the lender can service themselves but if they are thinly staffed resources quickly get strained.
Even with these very doable options, it is hard to terminate a business relationship that has a long history and some happy memories. But you know what? A new servicing relationship can be just as rewarding as the old one was when it was new. Maybe more! What lender couldn’t use a little more collaboration, a listening ear and conscientious servicing?
If you are a lender and have too many servicers or too few that perform consistently consider Essex Financial Services. We are exceptional at assisting you in retaining the relationships you want and matching your needs with great service. We are also good about remembering your birthday and the anniversary of when we first met. Call me.