When you get a home loan, you’ll begin the process by choosing a lender to work with. If you’re the borrower, from your perspective, a lender is a term that will include every party that’s part of your loan, but in reality, lenders don’t handle everything. A mortgage servicer might also take over your loan after you close on it.
A mortgage lender will either be a group of investors or a financial institution providing money to borrowers so they can buy or refinance homes. A mortgage servicer will deal with the administration of a loan on a day-to-day basis until you pay it off.
Some lenders service their loans, but most are too small to make a profit doing so, which is where a loan servicing company becomes part of the situation.
The Role of a Mortgage Lender
Mortgage lenders handle the origination of a loan. Origination includes working with a homeowner to choose a loan, taking the application for the mortgage, and processing the loan. The origination process also includes underwriting a loan, drawing up the documents, funding the mortgage, and closing it.
After your loan closes, the administration is needed on an ongoing basis until it’s paid off. This administration is known as servicing.
Most lenders transfer the mortgages they originate to a company that does loan servicing. You might not be notified until after closing, or your documents for your loan can tell you it will be transferred.
What Is a Mortgage Servicer?
Mortgage servicers can take on the tasks where a lender leaves off. The servicing of a loan can include taking and processing your payments, so that’s why it’s especially important to you as the borrower. You’re actually paying the servicer. Mortgage servicing can also include tracking loan balances and any interest paid. Your tax forms to show how much interest you pay every year are provided by your servicer, if there is one.
The servicer will manage your escrow accounts, so the company is responsible for collecting and paying your homeowners' insurance and property taxes.
If you default on your loan, the servicer begins the foreclosure process, and servicers can also do loss mitigation, which can help borrowers avoid foreclosure.
If you want to cancel your mortgage insurance and you have a loan servicer, you’ll go through them with that request.
Mortgage servicers can report the payment history on loans to credit bureaus, so if you think there’s been an error, you will contact this company rather than your lender.
Finding the Servicer on Your Mortgage
It’s possible that throughout the life of a home loan, you’ll have multiple servicers. You should see the name of the servicer on your mortgage statement. You can also get in touch with your original lender to ask them where they transferred the loan. There’s also the Mortgage Electronic Registration System or MERS. If a loan is registered with MERS, you can find it online and search with your property address, name, or Social Security number.
When a mortgage gets transferred to a servicer, the loan terms don’t change. You might get a different account number; otherwise, you’re just sending your payment to someone else instead of your original lender.
Your mortgage servicer can play a big role in your experience as a borrower. Good companies have strong customer service and make it easy to contact them, especially if you have questions. You don’t, however, get a choice in who your company is, nor can you opt to change your servicer. Your only recourse is to file a complaint with the Consumer Financial Protection Bureau if you don’t like your servicer or work with a lender that services its own loans.
Finally, when you apply for a mortgage, a lender is legally required to provide you with a Mortgage Servicing Disclosure Statement that will tell you if they plan to service the loan themselves or transfer it.