How to board a newly purchases performing 1st?

Question

After buying a Performing 1st from an online site, what is the next step? Boarding it w/ a servicer? How is that done? Does the seller overnight me the loan docs and I'm then responsible for setting up an acct w/ a servicer, handing them the loan docs to board the loan and making sure they start collecting the mortgage payments? What process do you go through once you have agreed to buy a note from the seller? Trying to understand the next steps so that I don't waste a sellers time while trying to get my feet under me as a new note investor.

Andy Mirza · Answer

@Chris Bingham The servicing transfer is done servicer to servicer and is coordinated by both to make sure everything is in compliance, especially the hello-goodbye letters. Have you identified who you'll be using to service your loans? If so, let them know that you just bought a loan and put them in touch with the seller's servicer. Make sure that both are talking to each other and coordinating the transfer.

The transfer should take 21-60 days, depending on what's in your loan purchase agreement.

The servicer will want all of the imaged documents for the loan. Custodianship of the physical collateral file is an additional charge for most and should not be a requirement of the servicer. You can use other 3rd party custodian services. I prefer to keep my files in a safe where I have easy access.

After you wire your funds to the seller, the seller should overnight the physical collateral file directly to you or to whoever you designate to receive them.

Dion DePaoli · Answer

Most of the basic information here is pretty legit.  Some of the logistics for street level trades are concerning.  Transfers do take place servicer to servicer.  Once you execute a trade the seller will need to send you, at the least, a copy of the signed Assignment of Mortgage within 2 or 3 days.  Files can take a couple of more days which will include original AOM and file.  With the a digital copy of the AOM in hand your inbound servicer will be able to complete the beginning stages of your file on-boarding.  Prior to that, with most servicers, you could have done some basic level of setting up your investor account with the servicer but it takes the AOM to prove your ownership and have them engage on a file level.At the time of funding the Seller should have alerted their servicing company to cut the loan off, in accordance with the contract, and expect a transfer.  Once the outbound servicer knows the inbound they will make contact with each other and the outbound will share servicing file data including images, accounting and other data including arrangements for H/GB letters..  In your contract you need to ensure you look for timelines for delivery of files.  A transfer has to at least allow for 15 days notice to the borrower before changing servicers for the borrower.  A file should only take a couple days to max a week before you receive into your custody or your assigned custodian.  There really isn't any reason a low file count loan sale transfer should take longer than 30 days with many completed somewhere around 20 days.

As far as who to use, not much more to it than preference.  Servicing, especially distressed servicing, is a pretty intense gig. Smaller servicers have less staff and so investor attention can be limited.  The staff have more files they have to deal with.  Some folks are driven by fees in selection which there are some differences not just in monthly fees but in additional fees for tasks.  You will want to run your own comparison and choose based on what you think you will need as best you can.  Just because I like Madison doesn't mean you will.  I may like them for their lower cost of performing loan fees while you need a higher touch plan on a NPL.  Thus, some of those discussions are apple and oranges.  In general, there is always a level of discontent it seems when it comes to servicers but we all have things we can do better.

Jamie Bateman · Answer

@Chris Bingham, the process varies slightly based on the online platform, the prior servicer, and the servicer you are using. Paperstac's process is rather streamlined as they kinda walk you through the sale. From there, though, it is always good to oversee the servicing transfer as this can take weeks to months. Each servicer has their own process for opening an account and boarding a loan but overall the process is not difficult. Be sure your servicer is licensed in the state your note is in and give the servicer a call to set everything up. You can store the collateral file yourself or pay a company to store it (sometimes through the servicer). Which online platform are you buying through? Which servicer are you using?

Jamie Bateman · Answer

I use Madison and Lake City Servicing (testing them out, although my main point of contact there is no longer employed there, apparently). Some other servicers are Allied Servicing Corporation, National Asset Mortgage, and Security National Servicing Corporation. It's never too early to contact the servicer. I would call them, ask around, check out their websites, fee structure, etc. You should first decide which one you want to use in general, as opposed worrying too much about the servicing transfer of one deal in particular. Given the current market chaos, this is a challenging time for servicers, for sure. You could always keep the loan with its current servicer to allow for a little more stability for you and your borrower.

Andy Mirza · Answer

@Chris Bingham In my experience, servicers range from mediocre to terrible. You should have your servicer lined up ahead of tim, instead of scrambling for one at the last minute.

Using the seller's servicer is not always in an option. After using a few of them out there, we've settled with FCI for now. I'd suggest that you use them.

How to board a newly purchases performing 1st?

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