Has the Spark Gone out of your Relationship with your Default Servicer?

The relationship between lender and default servicer starts the way most business relationships start: either the lender realizes they need a partner to efficiently handle the default side of the business, or the lender’s current partner isn’t fulfilling some part of the relationship and it’s time for a change. It’s a familiar pattern in life, as it is in business.

In an ongoing successful relationship, both parties’ interactions should be as open, honest and transparent during the later stages of the relationship as they are at the beginning. At the beginning of lender-servicer partnership, servicers are eager to assure clients they made the right choice: every client inquiry is handled quickly and efficiently, business development and client service teams assigned to the account eagerly shepherd files through each phase of the foreclosure process to its completion, and the client begins to see the light at the end of the tunnel in the backlog of default files clogging its servicing pipeline.

What lenders usually encounter, however, is disillusionment as their relationship with their servicer continues to unfold --- or unravel. Quick status updates to inquiries soon languish into lagging responses. The VIP treatment they received as a new client is soon forgotten as processing delays mount due to servicer missteps. And to add insult to injury, lenders sometimes find monthly billing statements riddled with ancillary internal charges usually not covered on the initial contracts that are supposedly justified as “the cost of doing business.” There are many cottage industries supporting the default servicing business, but relationship counseling is not one of them. Lenders find themselves trapped in a relationship with their servicer that at best, no longer meets their needs and at worst, insults them with terrible service and unreasonable fees.

Good default servicers must embrace one key principle if they are to enjoy a fruitful relationship with the lender through the tough default files and the routine servicing activities: never take your partner for granted. It’s a simple concept based on two simple factors:

1. Keep lines of communications open. Default servicers must be accessible when clients have questions. Accessible does not mean a voice mail message or delayed email response. It means real people in real time. And if there are processing or procedural delays, servicers initiate the conversation with clients on how they intend to resolve the problem.

2. Set the vows and then honor them. Experienced servicers know the comprehensive costs they must charge to process a file. Make sure their new business partner is aware of all charges at the beginning of the process, and preferably that the fee structure developed for the client is a comprehensive one free of “al-a-cart” pricing that typically blindsides the client during the billing process and ultimately proves to erode the relationship.

The goal of the default servicer should be to forge a long-lasting partnership with clients by providing them efficient servicing on files with no surprises and full transparency. If lenders feel their servicers have lost sight of the obligation to be response, have taken advantage of fee structures, or a combination of both, it’s time to play the field.