Magazine article Mortgage Banking

Improving Customer Service for Commercial Real Estate Borrowers

Magazine article Mortgage Banking

Improving Customer Service for Commercial Real Estate Borrowers

Article excerpt

RESPONSIVE CUSTOMER SERVICE is a very important issue for commercial real estate borrowers, and in many cases is a determinant of what lending source they choose. Third-party commercial loan servicers are facing significant challenges in providing consistent, high-quality customer service to borrowers. Commercial real estate mortgage loans have become more complex; servicing requirements have increased; and the compensation from servicing fees, ancillary and interest income has decreased.

The challenges in providing borrower customer service for commercial mortgage-backed securities (CMBS) loans is even more daunting, with multiple parties involved in credit-related decisions including the primary, master and special servicers; controlling class holders; and rating agencies.

CMBS securitization and loan documents also limit servicers' flexibility in what sometimes appears to borrowers to be unreasonable. Borrowers consistently complain about their ability to effectively make contact with their CMBS servicer.

Notwithstanding these challenges, it is critical for third-party servicers to find ways to improve customer service. Our business depends on borrowers and their willingness to continue to finance their commercial real estate properties with the loans that we service.

To some extent, commercial mortgages are a commodity product. Quality of service is not rewarded in servicing compensation. However, servicers can utilize high-quality borrower customer service as a way to establish an important and sustainable competitive differentiation.

Being responsive is fundamental to good customer service, and efficiency is critical to being responsive.

A borrower customer service program that is properly staffed, managed and monitored should not be more expensive than the alternative of providing mediocre or indifferent service. Improving responsiveness and efficiency in managing borrower requests results in better customer service and also can reduce the associated costs. The integration of advanced workflow technology and process improvement is an opportunity to improve customer service and reduce costs.

A strong and unwavering commitment from management and staff is a prerequisite to the implementation and maintenance of high standards of service. It is very important for management to identify and define what high-quality borrower customer service actually entails by activity. Standards for responses and turnaround times for specific activities should be established. Then metrics to measure performance must be developed and monitored and analyzed. You can't manage what you don't measure.

Quality commercial borrower customer service must begin when the loan is closed and continues until the loan is paid off. Setting the borrowers' expectations and providing easy access to information related to the loan and servicing activities is important. There are two major categories of servicing activities that must be addressed over the life of a loan.

The first is regular activities, which include receiving debt-service payments and required deliverables such as rent rolls, operating statements and financial statements, and updated certificates of insurance coverage. Servicers also provide borrowers with proof of payment of escrowed taxes and insurance, and Internal Revenue Service (IRS) forms 1098 and 1099.

The second category of activities is responses to borrower-initiated requests. These include a wide variety of activities, including reserve releases, lease approvals, payoffs, release of collateral, change of ownership, assignments, assumptions and other loan modifications.

These requests vary from routine to very complex, and the time associated with reviewing and approving them varies as well. Borrowers should have easy access to information about the approval process, time frames, approval parties, costs and what information is required to process the request. …

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