Loan servicing companies take on the burden of monitoring loans and collecting payments so the original lender can attend to other important business. In real estate, mortgage brokers set a loan up for a property with a loan servicing company and wash their hands of the responsibility of the loan. The loan servicing company may even oversee the foreclosure process in the event of a default. The service, however, is not exclusive to real estate. The borrower pays the loan servicing company. The lender gets paid from the loan servicing company.
List your services and goals for the business. Decide ahead what aspects of loan servicing will you take on for your clients. Mortgage News Daily states that loan servicing companies “collect mortgage payments, credit those payments, send reminders when payments are overdue, assess late charges (and) establish escrow accounts for the payment of taxes, hazard and flood insurance, and private mortgage insurance.”
Set your rates for the service. In the book, “Private Mortgage Investing,” Teri B. Clark and Matthew Stewart Tabacchi state, “The typical cost is 1 percent of your portfolio.” You can also charge a flat fee along with the percentage for administrative tasks.
Set up a filing system to keep track of loans in your care. Purchase loan servicing software to help you manage the files digitally. NoteSmith and Trakker are well known programs. Set up a few file cabinets to keep hard-copy documents.
Incorporate the business to protect the personal assets of the principles. Money lenders deal with people’s livelihood and are at risk of being sued as much as doctors. Hire an attorney to create your incorporation documents.
Get investors. You may need to buy servicing rights from commercial lenders and pay a staff to perform the administrative duties of managing loans. In the book “Money Magnet,” J B Loewen writes, “There are angels all around and you find them by talking to your suppliers and downstream customers.”
Buy stationery, coupon books for payment and monthly billing statements; have them printed by an office-supplies store. Office supply stores like Staples and Office Depot perform dual functions of providing printing and supplies.
Hire employees who have collection experience. They may need to place reminder calls when payments are late. Tiffany Black advises in Inc Magazine to use social media to recruit the best candidates. Post job openings on social-media sites like Facebook and MySpace and search through candidate resumes and profiles until you find candidates that fit the type of culture you want to create within your company.
Develop a list of private mortgage lenders in your state. Keep an eye on the business section of your local newspaper to see who are the financial movers and shakers. Skim through the Chamber of Commerce directory. Get names and recommendations from those working in real estate and the financial sector.
Introduce business to private and commercial lenders in the area. Send an introductory letter that describes your loan service company and how you can make things easier for them.