What Is Boutique Servicing?

Essex Financial Services is a boutique servicer. So, what does that mean?

Most third-party commercial mortgage loan servicers today serve their clients influenced by two historic models: Residential servicing and CMBS servicing. These models are represent “commodity servicing.” It may work for a specific product type; however, neither work well for these clients:

  • Life insurance companies
  • Private lenders
  • Originators of loans that do not own their loans but retain some level of post-closing management responsibility

In many ways, commodity servicing is the antithesis of boutique servicing:

  • Commodity servicing is “take it or leave it”; Boutique servicing is collaborative.
  • Commodity servicing is “yes or no”; Boutique servicing is “yes…and.”
  • Commodity servicing is monolithic; Boutique servicing is highly personal.

Commodity servicing works best for portfolios of hundreds or even thousands of very homogeneous loans owned by a single entity. The loans have standard documents, a single remittance point and regimented reporting. Since the originator of the loan rarely has anything to do with the loan post-closing, borrowers often feel orphaned when they need something. Customer service is cookie-cutter.

The boutique approach involves the servicer, the lender and sometimes, in instances where the loan was sourced by a party for that lender, the mortgage broker. Decisions are made by people versus trust documents. Loan documents are expected to be adhered to; however, the customer service approach is far more personal.

The boutique approach anticipates the need for more flexible remittance processes. Collected funds are often remitted to multiple parties similarly to how a trustee acts upon receipt of funds from a commodity servicer. Loans may be participated among many investors, and participants may receive varying yields. This is especially common in instances where the originator may have retained a first loss participated interest.

The boutique approach is more flexible from a reporting standpoint. The client may have reporting requirements heavily influenced by other parties (e.g., credit line providers, co-investors, third-party clients). The boutique servicer expects this. Standard reporting is available; however, variations are possible.

The boutique approach assures better monitoring of risk. Because the customer service function is more interactive, boutiques servicers are dialed in to risk during every interaction they have with a borrower. Not every risk presents itself through the analysis of operating statements, rent rolls and property inspections. Boutique servicers have ears in addition to eyes.

The boutique approach employs the absolute best of commodity servicing in three important ways: Technology, personnel, and management.

Due to the democratization of industry-specific technology, boutique servicing employs the same software as commodity servicers even though their operation is often a fraction of the size. Flexibility in reporting requires a higher per capita headcount dedicated to the technological outputs each client requires. The boutique servicer values more clients with less loans and this important resource allows each client to be treated well as their needs evolve.

Boutique servicing provides all the expertise of commodity servicing, but the people performing these services are trained to handle a broader array of functions. This ensures each associate possesses an intimate understanding of the needs of each client and borrower.

Boutique servicers are run by people who once worked for commodity servicers. To ensure the best service to an array of clients, management must be relentlessly engaged in vetting and applying best practices. Trade groups, colleagues and client feedback are key resources.

Essex Financial Services is your boutique servicer. We are rated by Fitch Ratings and are in compliance with Sarbanes-Oxley. Our people are experts in all aspects of loan administration, collateral surveillance and asset management Our experienced management gives you expertise and experience of commodity servicing but delivers on your terms. You decide the services and we deliver. Let’s work together.

Additional Reading Suggestions

What is Servicing?

Servicing was once simple:  Customer service, payment processing and escrow administration.

Servicing For Mortgage Brokers

Anyone who makes their living in the mortgage brokerage business will tell you it is a mercenary trade.


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