If you’re on the fast track to buying a home, you’ve probably come across a lot of different players in the game, including mortgage lenders and mortgage servicers. There are some important differences between a mortgage servicer and mortgage lender.
A mortgage lender is the lending institution that originates your mortgage. The loan officer you work with on your home loan is a representative of the lender. But once the papers are signed, the lender is no longer your primary point of contact. That role falls to the mortgage servicer, which is the institution responsible for administering your loan.
What Is a Mortgage Lender?
A mortgage lender is the financial institution that funds your mortgage. The lender serves as your primary point of contact during underwriting while your mortgage heads toward the closing table.
Once your loan closes, the servicing of the loan may be handled by a different entity. It may be the same company (for example, Wells Fargo both originates and services home loans), but you may have a different mortgage servicer, which will issue your mortgage statements.
What Do Mortgage Lenders Do?
Mortgage lenders guide borrowers through the entire financing process. In a nutshell, mortgage lenders:
• Help borrowers choose a home loan
• Take the mortgage application
• Process the loan
• Draw up loan documents
• Fund the mortgage
• Close the loan
After shopping for a mortgage and obtaining mortgage pre-approval, you choose a lender.
Your mortgage lender helps you compare mortgage rates and different mortgage types to find one that may be right for you.
The lender also answers any mortgage questions you may have.
Your lender will also fund the mortgage and close the loan. After your loan has been funded, it may be transferred to a mortgage servicer.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
What Is a Mortgage Servicer?
A mortgage servicer is a company that receives installment payments for a mortgage loan. It is responsible for administering the day-to-day tasks of the loan, which include sending statements, keeping track of principal and interest, monitoring an escrow account, and taking care of any serious concerns that may occur.
A mortgage servicer may or may not be the same company as your mortgage lender. The rights to service your loan can be transferred to another company. When this happens, your mortgage terms will remain the same, but you’ll send your mortgage payment to the new servicer.
What Do Mortgage Servicers Do?
The main role of a mortgage service is to collect your payment and ensure that the different parts of your payment (principal, interest, taxes, and insurance, and mortgage insurance, if applicable) make it to the proper entity.
The mortgage servicer will forward principal and interest to the investor (or holder of your mortgage note). Taxes collected and stored in the escrow account will go to the taxing entity when they are due, the insurance premium will be paid to the homeowners insurance company, and the mortgage insurance payment will be forwarded.
The mortgage servicer’s main duties are:
• Managing and tracking borrowers’ monthly payments
• Managing borrowers’ escrow accounts
• Generating tax forms showing how much interest borrowers paid each year
• Helping borrowers resolve problems, such as with mortgage relief programs
• Initiating foreclosure if the borrower defaults
• Performing loss mitigation to prevent foreclosure (in some cases)
• Processing requests to cancel mortgage insurance
Mortgage servicers also have the responsibility of preserving properties that are in distress. Should a hardship befall borrowers and they need to vacate the property, the servicer must step in to take care of the property while it’s in foreclosure proceedings.
Differences Between a Mortgage Servicer and a Mortgage Lender
To summarize, these are some of the major differences between a mortgage lender and a mortgage servicer.
|Mortgage Servicer||Mortgage Lender|
|Handles day-to-day administration of the loan||Is the financial institution that loaned you the money for the mortgage|
|Sends you your monthly statements||Processes your mortgage application and decides whether or not to loan you money|
|Keeps track of principal and interest paid||Assesses your income, credit history, and assets|
|Manages escrow account||Can pre-qualify or pre-approve borrowers for a mortgage amount||Responds to borrower inquiries||Can advise borrowers on loan options|
|Ensures that homeowners know their options should they fall behind on payments||Helps move the loan through underwriting, which includes verifying credit history, submitting supporting documentation, and ordering an appraisal for the property|
|Responsible for forwarding property tax payments from escrow account to the proper taxing entity||Supplies you with a loan estimate, which outlines the costs associated with the loan, including interest rate, closing costs, estimated costs of taxes and insurance, and monthly payment.|
|Responsible for property preservation should homeowners need to leave the home because they are no longer able to pay the mortgage||Supplies you with a closing disclosure, which plainly outlines the terms and conditions of the mortgage loan, including amount borrowed, interest rate, length of the mortgage, monthly payments, fees, and other costs|
Both the mortgage lender and mortgage servicer play an important role in the home-buying process but at different times. The lender will guide you in applying for and obtaining a mortgage. The mortgage servicer will assist in your everyday needs with the mortgage.
If you’re getting ready to shop for a home loan, consider giving SoFi Mortgages a look. SoFi offers competitive rates, low down payments, and flexible terms for today’s borrowers.
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What are the four types of mortgage lenders?
Banks, credit unions, mortgage lenders, and mortgage brokers.
What is the difference between a mortgage servicer and investor?
A mortgage servicer is responsible for the day-to-day administration of a loan. A mortgage investor is the person or entity who owns the mortgage note. The investor may be the originator, but it’s more likely that the investor owns a mortgage-backed security. A mortgage investor has no active role in the administration of the actual loan.
How do I find out who my servicer is?
You should receive monthly statements that will have information on who your servicer is and where you can send payment.
You can also find out who your mortgage servicer is by calling 888-679-6377 or going to www.mers-servicerid.org/sis, which has the current servicer and note owner information for loans registered on the MERS® System.
Can I change my mortgage loan servicer?
You cannot change your mortgage loan servicer unless you refinance your mortgage. Servicing of your mortgage, however, can be transferred to another loan servicer without your consent.
What happens when my loan moves to a new servicer?
If your loan has been transferred to a new servicer, the new company will send you a letter and you will need to send your monthly payments to them. The terms of the original loan will never change, no matter who the servicer is.
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