Putting in place a strong service agreement can help eliminate challenges encountered when servicing a loan. Brokers are beginning to broker loans to private investors and retain service rights to such loans, which provides a recurring source of revenue. Below are a few of the terms one should include in service agreements when brokering loans;

  1. Fees, Advances, and Reimbursement

The servicing contract should detail the terms under which the Broker can advance funds on behalf of the Lender. Generally, the agreement should provide a grace period that the Lender must meet in order to be reimbursed and outline the means through which the Lender must reimburse the Broker.

  1. Waterfall Following Loan Payments from Borrower

This ensures that the Broker is paid for the services it provides and that the Lender is not obligated to pay the Broker for the loan proceeds. In addition, this is to ensure the possibility of not being paid by the Lender for the Broker’s services.

  1. Specific Grants of Authority

The servicing contract should clearly outline the rights and duties of the Broker or any agent of the Broker. This should include the ability to collect scheduled payments, handle final payoffs, and initiate foreclosure proceedings. As a result, the Broker should be able to hire a third-party servicer under the terms of the specific grant of authorization (or sub-servicer).

  1. Foreclosure Transfer

The servicing agreement should include language allowing the Broker to share in the profits of a sale of the property underlying a loan if the property is transferred from the loan borrower due to foreclosure or otherwise. In many cases, the Lender will not want to be engaged in the post-foreclosure remedies involving the loan-secured property.

To read more on terms Brokers should include in-service agreements anytime they are brokering loans with Lenders, click here.


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Note Servicing Center provides professional, fully compliant loan servicing for private mortgage investors so they can avoid the aggravation of servicing their own loans and just relax and get paid.

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