The Importance Of Right Party Contact
Building wealth with notes shouldn’t involve accumulating headaches - so to avoid those headaches, you are better off by working with servicing companies. It’s important to know who they are and what they do.
What Are Servicing Companies
Servicing Companies are essentially licensed debt collectors who work on your behalf, so YOU don't have to have direct contact with your borrower. They will maintain that contact for you.
I strongly urge you NOT to self-service your loans. I did a video on this here, where I chat specifically on why that’s a bad idea, in my opinion.
What Does the Servicing Company Do?
The Servicing Company is in direct communication with your borrower and acts on your behalf. They are licensed debt collectors and they know the rules and regulations of what you can and cannot do when talking with the borrower. One key step when talking with a borrower is establishing what’s known as “right party contact.” To do that, they will issue what's called a “Mini Miranda”. The mini miranda tells the borrower that the Servicer is acting as a debt collector and that the call is being recorded. Further, it determines that the servicer is speaking to the correct party on the loan. You cannot speak to anyone about the loan that is not actually “ON” the loan (unless the borrower has issued written authority to do so). So, the servicer needs to verify that information up front, before ANY information about the loan is discussed.
How Do They Get Right Party Contact?
The servicing Company asks for their name, and asks security questions, including, but not limited to, verifying what the last four digits of their social security number is.
Why is that important?
Your borrower has a right to privacy about the DETAILS of their loan account. That seems crazy because the mortgage or trust deed is recorded in the county recorder's office. The recording just says that there IS a loan, but not the nitty-gritty details about the borrower or the status of the borrower's account.
Due to the right of privacy, discussions and decisions can only be made by those that are attached to the loan via the loan documents.
For example, if only a wife is on the loan, but the husband answers the call and says, “It’s okay, you can speak with me, I’m her husband...” the licensed debt collector will politely say that they can NOT speak to him. Unless both parties are on the loan, or there is a letter of authorization from the wife, the debt collector cannot speak with the husband, the unauthorized party. You would be amazed how many husbands/wives have no idea that their Mortgage is in default, and the debt collector can’t tell them unless they are the right party contact! I wouldn’t want to be in that house when the spouse actually finds out! 😲
It’s very important that the servicing company establishes right party contact with the person on the loan documents to protect their right to privacy.
If You Are Self-Servicing Your Loan
If you ARE self-servicing your loan, (although, again, I strongly advise against it), you will also need to establish right party contact. If you skip this step, it could get you in some legal trouble and in breach of the borrower’s right of privacy.
Remember - Right Party Contact is key!
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