Servicing Loan, Who And Whom?

By Limadijaya Suhendra

Servicing loan might be interpreted in different ways, depends on the subject who talks about it. Those who arent involved in business world might think that servicing loan is loan released for servicing something, such as house, car, or even electronic appliances. But here, servicing loan is widely generalized as the steps run to collect the agreed timely paying-back-loan, including its interest, until the whole loan is paid off.

Why is it so complicated until the loan is serviced even by a big company? As proof, these days, a lot of companies show up on surface, offering service for servicing loan itself. Take MGC Mortgage, Inc. in Texas, USA and even SBA (Small Business Administration) as examples, but we have to bear in mind that there are more than dozens servicing loan organizations throughout the world. They offer range options for servicing loan, with each company has its own to-be-considered points. MGCs focus is to providing specialization service in single family home loans, whereas SBA, as massive organization in States, provides more complex servicing loan in small businesses aspect.

How about in Europe? Is it about the same importance? Yes. Take UK as an example, UK loan outsourcing company called Target Loan Servicing recently brought a report for conquering assets under amount of 1 billion. The company has been established not even more than 3 years ago. What do they do? The answer is simple, servicing loan. Another example is Crown Mortgage Management, a firm which recently has gone paperless, turning to electronic management and called it as iConnecta. The firm can be considered as go-green servicing loan firm for its paperless management. Those can be good evidences how important servicing loan firms in the Kingdom.

Now let us talk about dark time in servicing loan industry. Recently, Thornburg Mortgage of Santa Fe has cleared as bankrupt, causing its jumbo servicing rights to be bid with starting number of US$ 11.5 billion. It is now still blur when will the beginning of the formal bid be, but brokers in servicing loan industry are aware for this opportunity. Another example is American Home Mortgage Investment Corp (AHMIQ.PK). Investor, as well as billionaire, Wilbur Ross in the year of 2007 was offered to pay the number of $ 435 million for servicing loan business offered by AHMIQ.PK which in that time was in bankruptcy state.

Discussing servicing loan furthermore compensation for the loan servicing company is an interesting part here, because not only does it play an important role but it also carries certain value upon the loans. Servicers usually receive compensation in the mean of percentage of the unpaid balance on the loan they are servicing. Definitely, its value depends on the sum of loan, as well period of the spoken loan. The fee rate might be the benchmark for clients, because however some of them dont really appreciate to give back what they have got. Especially if they must give it back, with additional interest upon the loan. Again, the-writteb-compensation can be two side coin, or even Yin & Yang because it is good and bad. The good is for the servicers, and the borrower gets the burden one. Think furthermore, servicers will get more than the primary loan amount, and the borrower will however pay the primary amount with additional percentages of it as an so-called-compensation. Thats why some servicing loan companies offer one good package of service, where the compensation is not bothering that much. In this case, who gives whom?

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