In one sentence
The ongoing administration of a loan after closing: collecting payments, managing escrows, testing covenants, and maintaining the record for the life of the loan.
The longer version
Servicing is where a loan spends nearly all of its life. Payment processing, escrow analysis, reserve releases, covenant testing, and borrower requests all run for years after the closing that gets all the attention.
The quality of the closing file is tested in servicing. A complete, organized handoff makes covenant tests and audits routine; a scattered one makes each of them an investigation.
In Prodeal
Servicing teams work from the deal's organized file instead of chasing the closing team, and TruStone cut daily servicing status email 75% running this way.
Common questions
- What does a commercial loan servicer do?
- Collects payments, manages escrows and reserves, tests covenants, collects borrower reporting, handles borrower requests such as consents, and maintains the loan file.
- What is the difference between primary and special servicing?
- Primary servicing handles routine administration of performing loans. Special servicing takes over loans in default or at risk and has authority to modify, foreclose or otherwise resolve them.
- Why does servicing depend on the closing?
- Because a servicer boards the loan from the closing file. Missing documents, wrong reserve balances or untracked conditions at closing become servicing problems for years.
Keep reading
- How life companies run commercial mortgage operationsThe long servicing tail.
- The post-closing audit trailWhat examiners ask for and how to have it ready.
- Loan participations: a working guideLead and participant, document flow, ongoing obligations.
- Loan administrationWhere this is tracked after funding.