Banks and credit unions partner with tax servicers in order to streamline processes like real estate tax monitoring and escrow processing. If you’re one of those lenders, you no doubt know the benefits of outsourcing these tasks. But have you ever thought about what goes on behind the scenes? This blog is going to talk about the relationship between tax agencies and tax servicers, and why it is important to lenders.
Working with the tax agency
Just like lenders who don’t outsource this process, tax servicers must work closely with tax agencies to obtain tax amounts and due dates for all the borrowers in their clients’ loan portfolios. However, the process of working with tax agencies isn’t always straightforward. Each one has its own specific process for requesting information, and different offices have differing levels of technology, impacting how the tax servicer interacts with each one. Plus, each office is fielding requests from countless lenders and tax servicers, making their job hectic as well. Because of this, many tax collectors will service first anyone who follows correct procedure and makes their job run smoothly, and leave the others for last.
Of course, the most important thing for the lender (and the tax servicer contracted to work with them) is to acquire the tax amounts and due dates in an efficient and cost-effective manner. Shrewd tax servicers make a strategic decision to proactively reach out to tax agencies they will be working with, and develop a mutually beneficial relationship—that ultimately benefits their clients.
What a bad relationship looks like
Before we examine what an effective, quality relationship looks like between a tax servicer and tax agency, we’ll take a moment to look at the other end of the spectrum, and what results.
For lenders who don’t use a tax servicer, working with the tax agency can be tough. The lender may not know the proper procedure for each tax collector, or there may be an unfamiliar staff member handling the task due to insufficient resources or simply turnover. Not following the correct process for each tax office means that tax amounts will likely be obtained late, negatively impacting the borrowers who need their taxes paid on time.
On the other hand, not all tax servicers make tax agency cooperation a priority either. In this case, the servicer will attempt to treat all tax agencies equally, without regard to their differing processes and requirements for gathering information. The servicer will settle on a process that works for them - rather than taking the time to find a mutually beneficial solution - and often this isn’t the best way for the tax collector. As mentioned earlier, because the tax collectors’ jobs are so hectic, they often (understandably) prioritize those requests that follow procedure and/or make their lives easier.
Examining a good relationship
Conversely, a positive relationship between the tax servicer and tax agency brings benefits to everyone, including the lender. To establish this good relationship, the tax servicer will proactively contact the tax agency, share their goals and needs, and discuss a process to benefit both parties. This does require more up-front work, and a tailored approach to each tax office (which is why many servicers don’t do this)—but the benefits are immense.
Tax agencies love the effort shown by the servicer, and their commitment to establishing a mutually beneficial process. And at the end of the day, tax collectors value anything that makes their job easier, and that is the goal with establishing this relationship.
Lenders benefit in a variety of ways, including more timely tax payments, potentially reduced costs, and more (read about this in depth in this blog). And if you’re interested in learning more about how the relationship between tax servicers and tax agencies—and how it affects the lender—be sure and download this ebook: Tax Servicers and Tax Agencies: Better Together.