How to Start a Mortgage Loan Servicing Company
Mortgage loan servicing companies are not the same as mortgage lenders. They collect mortgage loan payments and do not provide mortgage loans. Many of these companies service federally insured mortgages, such as those made by FannieMae and FreddieMac. As a servicing company, they provide third-party support between borrowers and lenders by collecting payments from borrowers and dispersing the funds to lenders. They can also collect property tax payments and homeowner’s insurance premiums. Lenders, not borrowers, are billed for this service.
Decide what types of services you will offer. This can include establishing escrow accounts, collecting monthly mortgage payments, assessing late fees and following up when borrowers fall behind on payments. Selecting between servicing privately insured mortgages, federally insured mortgages or a combination will help to determine which lenders can use your company’s services.
Organize your business. This means determining the rates and fees to charge clients. Many loan servicing companies charge a flat rate and a percentage-based fee for various administrative tasks. Unless you’re already wealthy, you will need to raise capital. This can be accomplished by encouraging family, friends, and co-workers to invest in your business or by appealing to outside investors. Loan servicing companies are usually always incorporated. Large amounts of money are involved in this industry and being protected through incorporation may also increase the probability of obtaining investor funds.
Acquire the equipment and supplies to run your business properly. This can include office chairs, desks, computers, pens and paper. Software designed for the mortgage loan servicing industry will also help streamline your operation. In a 2009 "Realty Times" article, Ralph Roberts says, “Many investors subscribe to an automated system called MERS (Mortgage Electronic Registration System) that keeps track of who owns the mortgage and note as it changes hands among investors, as well as who services it for that investor.”
Hire only the most experienced and productive employees. The quality of your company’s support staff will have a significant impact on your business, according to Realtor.org. Look for professionals who have work experience in the real estate or mortgage industry. This may include Realtors, mortgage brokers, loan processors or transaction coordinators. Asking others within your sphere of influence for employee references can sometimes be your best bet. Online job postings such as CareerBuilder and Monster can also prove useful.
Research mortgage lenders you’d like to have as clients. Compile a list and send them introductory letters offering your services and detailing how your company can assist them. Business connections through previous employment and networking relationships may help to provide your company with its first two or three loan servicing opportunities. By treating every lender as a valued client, you’ll increase the likelihood that your company will be considered for additional business in the years ahead.
Understand the expenses, costs and requirements of starting a mortgage loan servicing company. Being already familiar with the fundamentals of mortgage loan servicing and having worked in the industry for at least three years will increase your chances of running a successful business.