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Your loan servicer will have a ton of useful information on your loans available to you. But they can be confusing and hard to understand, and no two servicers use the same format. You have all this data at your fingertips, but it’s hard to find value if you can’t interpret them. In this episode, Dan Deppen goes through some of the most common lender portals and guides you on navigating them. Plus, Dan shares what’s the most complex versus the least cryptic portals there are. Stay tuned!

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How To Navigate Servicer Reports From Different Lender Portals

On this episode, I’m going to be talking about how to read a report from a loan servicer. This is something a lot of new folks struggle with. I get a lot of questions about this. While reading a report is fairly basic on one level, it can get a little bit challenging because no two servicers display data in the same way. Some of them use some cryptic descriptions of their columns and they don’t make it easy for investors to figure out what’s going on. Per request, I’m going to go through some of this with you.

First of all, what is a servicer report? What are we looking for? There are a couple of different reports you can generally pull out of the loan servicers portal. When you buy a loan, you get it boarded with a servicer. They’re always going to have some portal that you log into that you can look at all the information on your loans. Most of the time, what we’re looking for is a pay history report to see what payments have come in on the loan, how they’ve been allocated, how current the loan is, things like that. There’s also a lot of other information.

There are generally notes on the loan and sometimes call logs where the loan servicer if they’ve made contact with the borrower either over the phone or through email, they’ll document a lot of those things in there. Some servicers put detailed notes on there. It makes it nice. Some of them are insanely cryptic and are impossible to decipher. Sometimes I have to email them to find out what on earth their notes meant.

Why are these things so important? It tells you the performance of the loan. The pay history of the loan and the interactions the servicers had with the borrower tell you if this is a solid performing, weekly, sub performer, nonperformance, nonperformer loan. We’re going to refer to these reports continuously once you own a loan to keep track of your portfolio. They’re also very important during the due diligence process when you’re buying loans.

Before you even own a loan and you’re considering making an offer, you’ve made an offer and you’re doing your due diligence to determine whether or not it’s okay to close, you’re always going to get a copy of the pay history report. I always ask for the servicing notes from the seller because you can go through this. This is where you’re going to get a good idea of the performance of the loan.

Some of the others we look for in these reports is if they’ll show line items for escrows. They’ll show which portion of the payments were allocated to escrow. The servicer will show if they’ve paid property taxes. Sometimes force place insurance is handled through the loan servicer. It’ll show that as well. There are a lot of crucial information that you’re going to pull out of these portals both when you’re in that due diligence phase and then after you own the loan.

What I’ll do is I’ll go through some of the basics of what you’re looking for in these reports and things to understand. Also, talk about some of the challenges. The challenges will become apparent to you as I go through here. No two servicers’ portals are remotely the same. They like to make cryptic notes. Sometimes even in running a difference between the format of the data that’s displayed in the portal when you log in and then the format if you say you do an export to a PDF file or an Excel. The numbers are the same but the way it’s displayed can be different. That can cause additional confusion.

Some of the basics that we want to get right before we get started are some of the main things we’re looking for. On the report, you’ll see a number of rows and line items that could be payments that have come in from the borrower or payments that may have gone out from the loan servicers. Say, for taxes or insurance. In all of these, it’s going to show the actual date that that transaction occurred or the date paid. In addition to that, when the borrower makes payments, it’s going to show a date due. The date paid and the date due can sometimes be very different.

For example, you see a payment on a loan and it came in October 1st, 2021 but the date due was March 1st, 2021. What that tells you is the borrower is behind on the loan. If the borrower was current, say they had a payment due November 1st, you would expect for that payment the date due to be November 1st and then that date paid to be sometime in October, assuming they’re keeping up and paying on time. I’m guessing that’s probably how most people handle their mortgages.

That’s not the case when you’re buying nonperforming loans. In some cases, the date due and the date paid can be a couple of years apart. This is a loan that’s fallen behind but the lenders never foreclosed or there could be a lot of reasons why there could be a big gap between the date paid and the date due. It’s important to understand the difference between those two. Service reports are also going to show the loan balance, which is very important. We should be able to look at all the rows, see how that balance has changed over time.

Depending on the terms of the loan and if the borrower is behind, I’ve had loans where the borrower is making payments but the loan servicer was allocating all of those funds to interest, late fees, maybe lender advances and none of it was going to principals. The other thing we’ll look at is the breakdown for each payment that comes in and how the pieces of that payment were allocated. That’s important to understand because what you’re ultimately going to do is enter that into your accounting system. I happen to use QuickBooks.

In this show, I’m not going to get into accounting because that’s a whole subject in and of itself. As you receive payments from borrowers, you need to track which portions of those payments go to principal or interest because that’s going to be very important when it comes time to do your taxes. Sometimes they also list what’s called a record type on each row. That’s going to show what transaction this was whether it was a borrower payment, a tax payment, an insurance payment or perhaps a credit for lender advances.

No two lenders use the same terminology here. Sometimes the terminology is very cryptic. If you’re new to this, it can take a little bit of work to figure out what all of those mean. I’m going to walk through some of the different lender portals. If you’re reading, I’ll be able to explain everything. Payment allocation, in this case, I’m looking at the export of a pay history from Madison Management going from left to right. They usually show the basic information on the loan, the borrower’s name, the loan number and then these rows where it’s showing the date paid and date due. They’re fairly close in sync. There’s a column for the loan balance. You can see that steadily dropping over time, which is what you want. That implies the loan is probably current. The borrower’s making payments and a portion of those payments are going to principal.

In the report, you’ll see a few columns where they break out how each loan payment was applied. There should be the one showing what was applied to principal and interest. There’s another one showing what was applied to escrows. Sometimes they also say to impound. Impound escrows are typically the same thing. Sometimes they have something that’s called reserve. What happens on occasion is let’s say a borrower makes extra payments.

I’ve had borrowers pay ahead on loans. If the borrower starts paying an extra amount, that’s not a full payment. Let’s say their PNI is $400 a month and they randomly sent in a $750 extra payment. Sometimes the loan servicer isn’t sure how to apply that so they put it to what they call a reserve and then reapply it to payments later. Sometimes they call it suspense, which means it’s holding things until they allocate it later. There can also be a column showing any late fees that have been paid. Loan to loan late fees can vary based on the policies of the server in terms of the loan.

Sometimes loans will specify specific late fees and they’ll show a record type. In record type, this is showing whether it was a regular payment or something else. This is an area where servicers like to use super cryptic terminology and it can be a challenge to figure it out. That was one from Madison. If you look at one from Allied Servicing Corporation, there are some differences they do to make it a little more challenging. They’ve got all the same basic information and the same rows but some of their terminologies are a little different. They have a column that says date and that was the actual date that the transaction happened.

Instead of the due date, they have a column called IPDT. IPDT for Allied equals the due date of the payment. In this example, we’ll get a payment that came in on October 14, 2021 and the due date was October 1, 2021. They’re about 13, 14 days behind. They show the total amount for the payment and then all the breakouts for principal interest and escrows. Madison uses the term reserved for those extra funds. Allied uses suspense. Sometimes if they’ll have extra funds, they’ll apply it to suspense.

They might take funds out of suspense on another payment to say make a round payment or something like that. They’ve also got a column that says note. That’s super cryptic so a lot of times I’ll mention if it was a payment, the allocated two payments or something for late fees. Some of the stuff might sound complex but it’s not. Once you get used to these, you’ve gone through a few of them and are used to looking at them on a regular basis, you can usually figure these out pretty quickly. If you run into any problems, ping your loan servicer and they’ll be able to show you.

The other portal is the one from FCI. FCI is the cleanest and the clearest. I like to refer to FCI as the least bad option in loan servicing. I haven’t tried by far yet but hoping they fix all the issues. They’re showing the same columns. FCI has this one extra column that’s nice called Payment Day Variance. That spells out the number of days, the difference between the date the payment received and the actual due date. I’ve got one here that was received October 28, 2021. The date due is March 15, 2021. It tells me I’ve got a 217-day variance between those payments.

I’m going to take a quick tour of some of these portals. If you’re reading, I’ll be able to walk through all this. If you’re watching on video, you can get an idea of what some of these looks like. Within the Madison Management Portal, they’ve got the loan detail, which is the main page that you see. They’ll have all the general loan details, information on the payment, any information on taxes. To get the pay history, you need to go to the loan activity tab. From the loan activity tab, you can do an export to a CSV file. Generally, if you’re selling a loan, I’ll do that export and send that to someone else.

Day-to-day managing the portfolio, I log in and look at it. They’ve got another for escrow information where it shows the bills that are escrowed. It also shows a history of the funds going in and out of the escrow account. Madison has this awesome tab at the end called call logs, which you can also export. When you export their call logs, they’re not cryptic. They put it in a tough format. Madison’s call logs overall are pretty good. What I like about it too is they share the contents of any emails back and forth from the borrower. They also put in emails back and forth from the lender.

Sometimes, Madison has questions for me. I get it and respond, “Here’s what I want you to do with this loan.” They document that it’s easy because if they have someone else at Madison that’s helping out, say somebody is on vacation, they can go through this and see all of my instructions. The Madison call logs are pretty darn good overall. It’s one of the things I like about that portal.

We got Allied. Allied is known for having the worst portal of all of them. Apparently, years ago, they didn’t even have a portal and then they had an even worse portal. This is supposed to be a great improvement but you’ll find Allied challenging. If you board some loans at Allied, it’s almost best to call them and have them walk you through it. They’ve got an account list where you’ve got to go through and select the number of the loan but it doesn’t show the address or the borrower’s name.

I maintained a separate spreadsheet for all of my loans at Allied so that if I need to look up a loan, I can reference the loan number and then find it in their account list. They make it even more challenging because it’s a big list of account numbers but they’re not in numerical order so that makes it a little bit extra challenging. Their servicing notes are the most cryptic ever. If you use Allied, you’ll see a lot of notes that say S/W BORR, which in their parlance means spoke with borrower. It gives you no information about the contents of what they spoke with. They have a whole ton of other acronyms that they use.

They have another one that’s LMOR, which means Left Message On Recorder. That’s how old the systems are that they use. When you want to look at some of the portfolio-level reports and things, it’s tricky to tease that stuff out. Allied is not easy. The reason that I’ve been using them is they’re cheap, $13.50 a month. You’re paying less. The people historically had been pretty good. Lately, that’s changed quite honestly as they’ve gotten kicked out of Michigan and Pennsylvania. They have to transfer a lot of loans out. They’re going through some challenges for sure.

We got FCI. FCI has probably the best portal overall. It’s got almost too much information. If you go on the loan portfolio section, you can get in there, pick one of the loans and then they have a whole bunch of tabs. They got the loan detail, the borrower payments, notes and some other things. What I like about FCI is they’re probably the least cryptic of any of them and that makes life a little bit easier. FCI is more expensive than some of the others. There’s never any free lunch. That’s how it goes.

I hope that helped give you a little better understanding of how to interpret some of the data on these loan servicing reports and the portal. It’s a tedious topic when you board a loan. It’s often a good idea to reach out to the servicer and have them walk you through some of the stuff, maybe talk to other note investors who used that servicer to make sure that you understand all the information out there. To learn more about note investing, you can always find me at FusionNotes.com or the YouTube channel at YouTube.com/FusionNotes.

If you want to get in the game, start becoming active in this space and doing some of these deals yourself, you can go to the Note Launch Panel online training course at NoteLaunchPad.com where I’ve got one million videos, downloads, templates, checklists and calculators that’ll walk you through step-by-step so that you can go through, use and start investing in notes quickly and getting in the game. Thanks a lot for reading. I will see you next time.

Important links:

• QuickBooks
• Madison Management
• Allied Servicing Corporation
• FCI
• FusionNotes.com
• YouTube.com/FusionNotes – YouTube Channel
• NoteLaunchPad.com

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