Commercial Loan Servicing – Improving the Borrower Experience
In 2017, commercial and multifamily loans being serviced grew by about $120 billion to reach more than $3.1 trillion dollars. Commercial originations were up 15 percent in 2017, and delinquencies were low. 2018 is predicted to be another strong year, thanks to increases in Fannie Mae® and Freddie Mac® funding as well as Commercial Mortgage Backed Securities (CMBS).
Improving the borrower experience is particularly important for commercial loan servicers. Unlike single-family residential borrowers who may only purchase a new house every 10 years, commercial borrowers may require funding for multiple, big-ticket projects. Therefore, it’s prudent to take good care of your commercial borrowers so they’ll stay with you over the long haul. Furthermore, commercial lending is subject to fewer government regulations than residential lending, so commercial servicing agreements are often more complicated. Consequently, borrowers may have more questions and unique needs.
Realizing that “a borrower’s experience during the servicing process determines who they choose to partner and do business with on an ongoing basis,” Freddie Mac® has developed servicing standards that make the borrower the priority. The servicing standards encourage servicers to respond to borrowers’ needs in a timely, proactive manner during the servicing process throughout the life of the loan, and across all involved parties. Freddie Mac’s servicing standards address the primary concerns of borrowers post securitization:
· Responsiveness by all servicing and transaction parties
· Timeliness of decision-making and communication
· Flexibility in evaluating and responding to borrower needs
FICS’ commercial servicing software, Commercial Servicer®, handles routine servicing operations such as investor reporting efficiently, giving servicers more time to respond to unique borrower needs. FICS® keeps up with changes in investor reporting requirements, making servicers’ jobs easier.
Improving the Borrower Experience
Decrease response time to borrower requests. Customers expect and deserve a quick turnaround time. Commercial Servicer® presents loan data in an easily accessible manner, facilitating prompt responses to customers. The Commercial Servicer® API allows the scheduling and automation of system programs, reports and interfaces, saving time, eliminating after-hours work and reducing errors. Automating your servicing processes saves your staff time, enabling them to respond more quickly to borrower requests.
Provide borrowers with 24/7 online access to loan information. By making this information readily accessible to borrowers, you can reduce the time your staff spend on the phone. FICS’ LoanStat® allows borrowers and investors to view loan information (e.g., loan statements and payment history) online. Borrowers can also make payments online.
Clarify and simplify the language in servicing documents. Using standardized, clear language makes it easier to understand the documents and makes it clear to servicers what actions they can and can’t take to meet borrowers’ needs.
Increase staff training. Set the expectation that servicers should answer borrower calls and emails promptly, preferably within one business day. Goldman Sachs employs a servicer liaison who receives all requests sent to the servicers, so they can monitor responsiveness and whether servicers are adhering to timelines.
Evaluate fees, particularly for CMBS loans. To enhance the CMBS borrower experience, Wells Fargo is not charging their new CMBS borrowers recurring fees for borrower requests and processes such as lease approvals, escrow analysis and “pay by phone” payments.
Responding promptly to borrower requests, simplifying the language in servicing documents and evaluating fees can improve the commercial borrower’s experience. Using leading-edge commercial servicing software improves efficiency, giving commercial servicers more time to satisfy borrowers’ individual needs. FICS’ Commercial Servicer® automates servicing operations for different types of commercial loans and is flexible enough to handle unique servicing requirements.