Winning the Competition for Loan Servicing

Given today’s still-limited loan production numbers, competition for third-party commercial loan servicing business can be pretty intense. Providers will need some new tools to get ahead.

Given today’s still-limited loan production numbers, competition for third-party commercial loan servicing business can be pretty intense.

“Technology really will be the big differentiator in the business going forward,” predicted Stacey Berger, executive vice president of Midland Loan Services, a division of PNC Real Estate.

Loan servicing being a technology-intensive business, companies get an edge if they have the size and wherewithal to make the necessary capital investment, although outsourcing the technology to third parties like Midland is also possible.

Midland was able to increase its servicing portfolio this past year, in part through acquisitions from the Federal Deposit Insurance Corp.’s pools of distressed commercial real estate loans acquired from failed banks. It also helps if companies are profit centers that make their own decisions with regard to resource allocation, added Berger. “For Midland, we are fortunate to have a supportive parent company that has a mandate to continue to grow the business.”

The ability to furnish superior customer service, whether to the investor or to the borrower, is also a differentiator. “Having better people provides you with a competitive edge,” said Larry Stephenson, executive vice president & regional manager of production at NorthMarq Capital.

NorthMarq was able to maintain its portfolio size this past year through production of new loans. The company also brought in some life insurance loan servicing business via the hiring of new employees. NorthMarq’s focus on loan servicing is on customer service to both the lender and the borrower.

For Beech Street Capital, which services its own multi-family loans but is currently applying for a master servicing license, providing deluxe customer service means such efforts as assigning an asset manager to every borrower.

“We feel there should be one person assigned to the loan who will be the contact for property inspection, financial reports and borrower requests,” said Rohit Khanna, vice president of asset management. “That way, you build a relationship with the borrower. Versus having five different people touching the account, we only have one.”

When borrowers are first brought on board, the asset manager will get in touch with them to thank them for the business. “We want to make sure the relationship is personalized, that it is not an institution the borrower is dealing with but people.”

Beech Street aims to reap the rewards of such an approach when its customers are back in the market for financing or refinancing–hopefully, they will think of the company first. “The loan is going to be with the primary servicer for five, 10, 15 years, so back-end servicing is really crucial to getting new business,” Khanna noted.

For more on today’s loan servicing environment, see “Shrinking Pie” in the May 2011 issue of Commercial Property Executive.