“What In The World Is Note Servicing”? This is the most common question asked by attendees at the convention when visiting our booth. To put it more bluntly what they ask is: “So, what do you do anyway?”
I guess it’s a fair question, after all, It makes sense to have your car serviced which could involve changing the oil, charging the battery, a grease or tune up or maybe a brake adjustment. In case you’re asking, the answer is: No, a note Servicer does not fix the payment, change the rate, charge the borrowers, and adjust terms. It even makes sense to have your pool or office equipment serviced. But, what people are really asking is “Servicing a Note” just doesn’t make sense. How, in God’s Green Earth does one “service a note” and what does servicing mean to the cash flow specialist and how can servicing benefit me whether I am an investor, broker or buyer?
Sometimes they ask, “Are you a Collection Agency?” You know, someone to shape up the “no pay and slow pay”, when all other means have been exhausted in law and equity. Although the collection from the payor and distribution to the payee is part of the task and done in accordance with the terms of the contract (note) is done by the Servicer as a routine part of the “Service”, it hardly scratches the surface in terms of the benefits derived from using a Servicer.
Professional Note Servicing sounds as interesting as yesterdays news, boring as a grade Z movie and with about as much appeal as a stop sign. But a good Servicer actually finds the task incredibly exciting, exhilarating and challenging. The reason is quite simple: Servicing can assist the Broker to build their own personal note portfolio and can turn a handful of chopped liver notes into a prime rib portfolio.
Also, we deal with some of the most creative note investors on the planet. Note Servicing provides enormous benefits as it relates to non-traditional financing as well as augment the ability of brokers and investors to implement wealth building strategies.
First, The All Inclusive Note, sometimes called a “Wrap Around” is once again becoming the instrument of choice by many investors for all sorts of reasons; not the least of which is the ability of the investor to increase their yield by making money on the spread rather than taking back a straight second trust deed. There are other reasons to use the all inclusive as well, specifically as follows:
These days we hear a lot about the “all inclusive” note typically written around an institutional loan. Obviously, there are risks and rewards associated with this strategy. However, by using an experienced and reputable note servicing company prior to transfer of the property who will notify the lender that the owner has authorized a servicing agent to make the payments and that all subsequent payments will be made by the servicing