Cozy for seller carryback? Overkill to use loan servicer?

[Paul Winka]

I recently agreed to take back a note on a property I am selling. We’ll close at the end of the week at a title company.

At this point, the way I set out to handle the mortgage payments is through Cozy, just like it were rent paid. It's free and straightforward. The only hiccup I see is if the mortgagor decides to make extra principal payments. Cozy is better for the same thing at the same time every month and would imagine extra principal payments could be handled well by loan servicers over cozy. And then there are probably tax forms that need to be sent out by 01/31 that they'd probably take care of?

At some point, I plan to scale up and purchase some first trust deed notes and get more involved in this field. But for now, is it overkill to set up payments with a servicer like FCI, Madison Management, Polaris, FCI, PPR, Allied Servicing, or ZimpleMoney for this one-off deal? I’ve started exploring these websites while writing this post.

What I have read thus far is that these servicers “keep you in compliance with federal regulations” and it’s obvious they provide a value for investors wanting to scale, because I don't see how one could be involved with dozens or hundreds of notes and stay on top of it all. But just one to start, do I really need a servicer? 

[Andy Mirza]

@Paul Winka I would say "yes," especially if you're dealing with an owner-occupant. Are you ready to learn a whole new subject (Servicer compliance for a consumer loan) or would you rather focus on scaling your note business? If there's any chance of you selling this note down the line, you'll want to have a professional servicing company as well. Unless you do a fantastic job of self-servicing, most note buyers will expect a deeper discount for a self-serviced note. We outsource servicing to offload the servicing compliance risk. If we had enough notes to justify it, I'd prefer to keep servicing inhouse but it would be another business. An inhouse servicerwould be better for loss mit purposes in my opinion.