Why you need to manage your vendors as a note investor.....

[Chris Seveney]

We recently acquired a pool of loans from a seller who outsourced their loan servicing. Nothing unusual—except what we found buried in one of the Maryland files.

The loan had been extended three times, with $8,400 in deferred extension fees agreed upon. But the kicker? Those fees were never added to the loan balance by the prior servicer. Meaning they would’ve been lost entirely unless someone caught it.

That someone was us. Our asset manager spotted the mistake, and had our servicer correct the balance.

This isn’t just a one-off. If your servicer is on the cheapest plan available they typically are on "autopilot", these types of oversights can happen—and the financial impact adds up fast across a portfolio.

Here’s the real takeaway: even if you’re outsourcing loan servicing, you still need to manage the servicer. That means:

- Reviewing files yourself periodically

- Making sure you communicate with your vendors and follow up to confirm they did what they are supposed to do.

- Setting expectations for communication and accountability

Vendors aren’t infallible. It’s your job to ensure nothing falls through the cracks—because once money is lost, it’s hard to recover.

Managing your vendors isn't optional. It’s part of being a responsible note investor.

Have you had similar stories in the past? 

[Chad U.]

Acquired a pool of loans a couple years ago from a now defunct servicer.  On one of the loans the borrower had applied and was approved for an HAF reinstatement which occurred just after the loan transfer.  This was unbeknownst to us as it was not indicated in their servicing notes. Luckily the HAF counselor reached out to our new servicer to inquire whether we had received the funds so they could close the case. We had not as they had gone to the prior servicer. The funds were quite substantial and actually more than we paid for the loan. After several weeks of refusal, the servicer released the funds to us as I pointed out that this would have been fraud if they kept them.