Over the past several weeks we have discussed the benefits of outsourcing for lenders as well as some of the most commonly outsourced lender services. By way of these blogs, we hope to provide you with a deeper understanding of what challenges financial institutions are facing today, as well as what can be done in order to meet these challenges. A couple of weeks ago we discussed a handful of the top benefits lenders receive from outsourcing specific mortgage services, including saving money, saving time, reallocating internal resourcing and expanding nationally.
In addition, last week we discussed what services are most commonly outsourced by lenders, such as real estate tax monitoring, escrow processing, flood determination and property insurance monitoring.
For today’s purposes we are going to focus on one of the services mentioned above: property tax services, also known as real estate tax monitoring. This is one of the most important services offered by financial institutions, in large part because borrowers rely on lenders to ensure their taxes are paid on time.
How Outsourcing Property Tax Services Can Help Both Borrowers and Lenders
There are serious implications for both the borrower and lender when a borrower is delinquent on their property taxes. The mortgage could eventually go into foreclosure, meaning the borrower loses their home—and the lender loses that revenue from the mortgage. Monitoring property taxes is a significant burden for lenders, which is why outsourcing property tax services can be extremely efficient and effective. Let’s take a closer look at a few benefits of using a third-party vendor for property tax services:
Decreases internal expenses
It can be costly - and time-consuming - to make sure that all loan customers are on top of their property taxes. By outsourcing these processes and adapting an escrow management model, lenders can focus on other duties and financial institutions can decrease internal expenses overall.
Offers peace of mind
It certainly isn’t an easy task to ensure each and every borrower is paying their real estate taxes on time. By outsourcing this service, lenders will no longer have to spend countless hours worrying about whether or not their loan customers are paying their taxes on time, and gives the financial institution peace of mind that their loan portfolio isn’t at risk.
Takes burden off of financial institutions
Last but certainly not least, outsourcing property tax management often provides greater accuracy than managing it in-house, which takes the pressure off of lenders in regards to compliance. When a third-party vendor is brought in to take over this task, the lender is no longer liable for potentially delinquent borrowers.
Outsourcing Property Tax Services Could Prevent Delinquencies
If a borrower is delinquent on their real estate taxes, this may lead to delinquency on a mortgage, which causes numerous issues for the bank or credit union as well as the borrower. When a borrower does not pay their taxes on time, the chances are greater that they will default on their mortgage, which means the financial institution will never recoup the funds that were loaned. Let’s face it, banks and credit unions take a huge risk when they approve someone for a loan, which is why they need to do everything they can to ensure they will eventually get this money back.
By outsourcing property tax monitoring services, a financial institution is in a better position to avoid a borrower becoming delinquent. The bottom line? Both the borrower and the lender are being set up for success by outsourcing real estate tax monitoring.
To find out more about the benefits of outsourcing mortgage services, in particular real estate tax monitoring, be sure to download our recent ebook, The Benefits of Outsourcing for Banks and Credit Unions. And if you have anything to add on this subject, please feel free to use the comment section below.