Servicing four sub-to loans, and I'm about to become the problem

The text-code thing is going to happen on all four eventually. Every servicer is tightening login security and none of them are doing it on a schedule you can predict.

I run six doors and two of them came to me with existing loans in place. Autopay pulled from an account I fund, drafted by the lender, is the only setup that has never surprised me. Portal logins break. ACH pulls don't.

@hollow it can care. On one of mine the address change is what generated an occupancy questionnaire. Not saying don't do it, saying it isn't free. I'd rather have the seller forward mail than touch the loan record.

I do coordination work too and the version I settled on is a single point of contact who is not the buyer and not the seller. Someone whose job is to look at four confirmation numbers on the second of the month.

Your $22 to $45 buys that plus a receipt trail. That's cheap for what it prevents. The thing I'd interrogate is the two months held. On $340k that's a real chunk of dead capital and I've never had a servicer justify it to me beyond "it's our policy." Ask them what happens to it on a payoff and how fast they release.

The exposure question has an answer and it's less dramatic than you think. The lender already has a recorded deed transfer sitting in the county record, assuming these were recorded, which they should have been. That's the trigger event, and it's public in most states, though roughly a dozen states don't make sale prices public and recording practice varies. A servicing statement showing a third party remitter does not create the transfer, it documents payment.

So you're not increasing the fact pattern, you're increasing the odds someone at the lender notices it. That's a real difference and it's smaller than the difference between paying on time and paying late.

What any of this means legally depends on the note language and your state, and a real estate attorney should read all four notes rather than assume they're the same. They usually aren't.

I'm new here so tell me if this is a dumb question. Why is the buyer logging into the seller's account at all? Can you not just send the lender a check?

@rigging you can, and some people do, money order or cashier's check with the loan number on it. It works and it's slow and you have no confirmation until it posts. Which is exactly the seven-day gap Plumb described.

The seller who told the rep she doesn't live there is the file I'd worry about, not the servicing. Eleven months of nothing is eleven months of nothing, it isn't absolution. Does that buyer have a priced Plan B or does he have a hope?

On the lending side of it, what gets a loan flagged in practice is usually a payment problem or an insurance change, so a fresh policy in an LLC name with a different mailing address is a bigger signal than a servicing statement. I'd sequence it: fix the payment reliability first because that's the thing that actually causes calls, then decide about the notice mail.

And Plumb, on who eats the setup for the eighteen-month-old files. You do, if you want to keep those relationships. It's a few hundred dollars against a problem that costs a client their deal.

I've been reading these structures for six months and this thread is the first time I've seen anyone talk about the second of the month. Everybody talks about the rate gap and nobody talks about who checks the confirmations. Filing that.

@flint's point stands and I'd go further. Anything that makes the loan file look different than it did at origination is an action that might get looked at. Insurance, mailing address, autopay source. Four separate small changes over a year read differently than four in one week.

I'd sell this as a product, honestly. Four buyers paying $45 a month for someone reliable to handle payment and notice on a sub-to is a business. Whether doing it for compensation triggers a servicing or collection license depends on your state, and some states are strict about it, so that's a licensed-attorney question before you take the first fee.

I'm still building a list, so that's my angle here. The whole appeal of these deals is the 2.75% and the appeal survives all four of these problems. $58 late fee and $91 escrow bump on a loan two full points under market is noise. Am I missing something or is this thread mostly about operational hygiene?

@bramble you're missing the tail. Yes, the rate gap is worth more than the late fee, by a lot. The reason people care about the second of the month is that a 30-day late report on the seller's credit is the event that converts a cooperative seller into an adversarial one, and an adversarial seller can call the lender and say the thing that seller in Plumb's third file already said. That's the chain.

Plumb, my numbers on your decision: four loans at $35 average is $1,680 a year. Call the downside case a called loan on the $340k at 2.875%. Replacing that financing at current rates costs multiples of $1,680 annually, assuming you can even qualify it. I'd pay it. I wouldn't pay the two-month reserve without a written release schedule, and if they won't put it in writing, find a shop that will.