Mortgage servicers are companies responsible for the logistical aspects of servicing a loan. Things like processing and tracking payments, sending payment reminders and filing foreclosure documents are some of the tasks they perform.
How loan servicing works
Your mortgage servicer helps handle your loan, but also satisfies certain federal requirements. For example, your servicer sends a report each year describing your accounts balances, property tax payments, homeowners insurance and other pertinent account activity.
Sometimes, your loan servicer might change financial institutions. When this happens, servicers are required to notify you within 30 days of your mortgage transfer.
Parties involved in the mortgage service industry
The mortgage loan industry involves three key players: mortgage lenders, investors and servicers.
Mortgage Lender
The lenders, or originators, are banks or mortgage firms that give you the money when a home loan was approved for you.
Mortgage Investor
A mortgage investor is a person or organization - often a government-sponsored entity - that buys the entire mortgage from the originator. This allows the lender to sell additional mortgages.
Loan Servicer
Finally, the servicers are companies handling your loan account. In some cases, the loan owner - whether a lender or investor - can also be a servicer. However, borrowers are usually connected with a third-party company to help manage repayment.
Changing your mortgage servicer
Having a quality loan servicer can make a huge difference in your borrowing experience. An excellent company maintains accurate information, is quick to contact and offers good customer service. Their important duties include canceling mortgage insurance, assisting in avoiding foreclosure or answering general queries.
Unfortunately, you have no control over who can buy and service your loan. The lender’s right to sell to an external company is included in the terms of service you have to agree to when signing up for the loan.
These are only a few of the important aspects of mortgage servicing to know. However, the more you understand about the parties involved, the better borrowing experience you’ll have.
About the Author
Bob Hummer
Bob Hummer brings a wealth of experience with him; a practitioner in real estate in Northern Virginia since 1978, a Life Member of both the Million Dollar Sales Club and the Top Producers Club with over 2,500 Satisfied Families and President, Prince William Association of REALTORS in 1991. His experiences range from helping buyers and sellers attain their goals; to renovating historic homes on Capitol Hill; to counseling and assisting homeowners facing the loss of their home due to foreclosure. Since 1996, he has presented his free monthly Home Buyer and Home Seller seminars at the Woodbridge campus of Strayer University. In June 2023 he completed the Certified Probate Real Estate Specialist course and was awarded the designation CPRES. His goal is to assist individuals who inherited real estate and wish to sell. A former "Military Brat" and a retired Air Force Hospital Administrator, Bob has made more than 26 moves during his life and is extremely familiar with all aspects of a family relocating - whether it is across the street or across the nation.