Choose Your Servicer Wisely
- Sunday, August 15, 2010
Once you have decided to open a self-directed IRA, you are presented with an almost endless amount of investment options: real estate, trust deeds and mortgage notes, precious metals, private stocks, and many others. It’s a critical decision—one that could trigger the kind of financial security you have always dreamed about.
But that will not be the only crucial decision you will have to make, especially if you choose to invest in trust deeds and mortgage notes. Your trust deed/mortgage note should be professionally serviced, and how you choose a servicer could be the difference between a successful investment and one that sends your dream retirement into foreclosure.
There is a misperception in the public today that a loan servicer simply sends a bill and collects a check. However, things are not that simple anymore. Borrowers have encountered more unexpected struggles in today’s whirlwind economy than ever before. We have entered an era littered with foreclosures, loan modifications, short sales and ever-changing compliance issues that can only be handled by highly-skilled, specialized professionals.
In consequence, the days of just selecting the first loan servicing company that pops up on Google or Yahoo!—or even just servicing the loan yourself—are over. It is imperative, now more than ever, to take caution and care when selecting a professional loan servicing company.
So, where do you start? When choosing a service provider, make sure the company includes services to help you navigate through potential tough times with borrowers. Better yet, make sure the company has an arsenal of products available to prevent problems before they occur. Laws are changing rapidly; make sure your servicer has a strong track record of keeping up and keeping clients informed. Security, professionalism, and accessibility are all necessities.
Here are five questions you will want to know the answer to before choosing a servicing company:
- How often does the company contact late borrowers? Communication with your borrower is vital. Generally, you want your servicer to perform late calls at least once a month. Your servicer should be easily accessible for both you and your borrower.
- Does the company offer senior lien, insurance, and tax tracking? Tracking your borrower’s insurance, taxes and mortgage in first position is an excellent way to prevent a problem with your loan before it happens.
- Is the company licensed and bonded? A company that is licensed and bonded must keep up with the ever-changing compliance issues and laws.
- Does the company offer foreclosure and REO assistance? Your servicer should offer you foreclosure assistance from Notice of Default through the possible possession and sale of the property. You do not want to be abandoned at a time you need your servicer the most.
- Does the company offer online access to monitor the status of your account? You can put your mind at ease at anytime with 24-hour-a-day access to your account.
As you can see, there is quite a bit of homework that needs to be done. But do not be intimidated; the payoff in the end is worth it. A dedicated loan servicer will give you peace of mind, more free time to attend to other investments, and keep your cash flow moving. Most of the potential headaches, that would otherwise be yours, are taken on directly or avoided entirely by an employing professional.
By Drew Louis
Drew Louis is the President of Del Toro Loan Servicing, Inc. Drew has been in the financial services industry since 1989; he and his staff have been servicing loans since 2003. Visit Del Toro online at www.DelToroLoanServicing.com, or call Drew for more information regarding loan servicing at (619) 474-5400.
DISCLAIMER: As an IRA administrator, Entrust Administration, Inc. does not affiliate itself or make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms). Entrust Administration, Inc. is not responsible for and is not bound by any statements, representations, warranties or agreements made by any such person or entity and does not provide any recommendation on the quality profitability or reputability of any investment, individual or company.