When we talk about financing real estate investments, we tend to focus on finding the money, whether it’s from a traditional lender, a hard money lender, or another source. But there’s an aspect to real estate financing that investors and homeowners need to be aware of: loan servicing.

Once a conventional mortgage loan is closed, lenders may turn the account over to a loan servicing firm for management. And borrowers have absolutely no choice in this decision, and little recourse if the service is bad and the firm engages in predatory practices, such as profiting from loans in collections, failing to report positive payment histories to credit bureaus, converting a loan to simple interest (more money for the lender and servicer), and more.

For an interesting look at this issue, read Jack Guttentag’s column, "Predatory servicing deserves a cleanup." Guttentag is a syndicated columnist and professor of finance emeritus at the Wharton School of the University of Pennsylvania.

Jackie
Chief Blogger
Wealth Intelligence Academy