“Where do I send my payment?” is one of the first questions on a homebuyer’s mind after closing on their mortgage. Your mortgage servicer hopes you know the answer, because your point of contact is no longer your loan officer.
A mortgage servicer is often different from your lender.
To navigate the finer points of mortgage loan servicing, here’s a handy guide to help.
What Is Mortgage Servicing?
A mortgage servicer is the company that manages your mortgage payments. A mortgage servicer is not the same thing as a mortgage lender; nor is the company the holder of your mortgage note.
Because of the way the mortgage market works, a servicer is needed to ensure that all the correct parties are paid on time and that any issues with the borrower or the loan are handled properly.
How Does Mortgage Servicing Work?
Mortgage servicing begins after you close on your loan. At this point, a servicer may take over from the lender to manage the day-to-day needs of the loan.
The mortgage note likely will have already been sold on the secondary mortgage market to a government-backed home mortgage company such as Fannie Mae or Freddie Mac. These companies then bundle similar mortgage types and sell them as investments.
From the borrower’s point of view, one company gave them a loan, one company holds their mortgage note, and yet another company is responsible for taking care of the administrative tasks of the loan (though some borrowers will have the same lender and servicer).
Most borrowers will only see who the company taking care of these tasks is. That’s the mortgage servicer, which collects your payments, responds to your inquiries, and ensures that the proper entities are paid, including the owner of your mortgage note and all parties that need to be paid from your escrow account.
Which Parties Are Involved in Mortgage Servicing?
Mortgage servicing has a few layers.
The servicer collects payments and sends money to the mortgage note holder and the entities paid from an escrow account for property tax, homeowners insurance, any mortgage insurance premiums, any HOA dues, etc.
The lender originated your loan. It may be the same entity that services your mortgage loan, but the lender also can transfer or sell the rights to service your mortgage. Even if your loan stays with the same company, the person who originated your loan won’t be who you contact when you need to make a payment.
Investors buy your mortgage when it is bundled with other mortgages of the same type from one of the government-backed home mortgage companies (such as Fannie Mae or Freddie Mac) and some financial institutions. Holders of mortgage-backed securities receive a portion of principal and interest payments.
It’s an important mechanism for growth in the housing market. As lending institutions sell mortgages to another entity, they are able to originate more new mortgages to more families.
Mortgage servicers have to follow federal mortgage servicing regulation rules. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are both involved with regulation of mortgage servicing. States can also be involved with the regulation of mortgage servicers.
The FTC enforces laws that protect borrowers from deceptive mortgage practices and takes actions against companies that use illegal practices against people facing foreclosure. The CFPB watches out for consumers by ensuring that mortgage servicing companies comply with federal consumer protection laws.
What Do Mortgage Servicing Companies Do?
Mortgage servicing companies have three main roles.
A mortgage servicing company is responsible for collecting payments from borrowers and passing that funding on to the mortgage note holder. When borrowers are unable to pay or are going through a hardship, it is the mortgage servicing company they are to contact. The servicer can advise homeowners on their options, including loan modification, a short sale, or a deed in lieu of foreclosure.
If a homeowner is unable to continue payments and foreclosure is unavoidable, the servicer initiates the process and maintains the property until it is sold.
Maintaining Escrow Accounts
Mortgage servicing companies are also responsible for maintaining escrow accounts.
They will take your mortgage payment, which is divided into principal and interest that goes to the holder of your mortgage note, and a payment into an escrow account for taxes, insurance, and any mortgage insurance and HOA dues. By maintaining the escrow account, the mortgage servicer can ensure that all the entities are paid on time.
Not all mortgages require an escrow account. Whether a new home loan will require one is among the mortgage questions to ask your lender.
Keeping in Touch With Borrowers
In the event a new servicer is secured, the transfer must be done in a timely manner that enables the new servicer to comply with applicable laws and duties to the consumer. Borrowers should receive a letter at least 15 days before the date of the transfer.
Do I Need to Know Who My Mortgage Servicer Is?
Yes. Your mortgage servicer is your primary point of contact for paying back your mortgage. It is essential that you know who your servicer is and where to send your mortgage payments.
It is possible for the rights of servicing your mortgage to be transferred to another company. In this case, the terms of your mortgage won’t change, just the company that administers your mortgage.
How to Find Out Who Your Mortgage Servicer Is
There are several ways to find out who your mortgage servicer is.
At closing, you provided an address where the servicer should send statements. The name and contact information of your mortgage servicer will be included in the statements sent to you. This is how most new homeowners find their servicer’s information.
Payment Coupon Book
In addition to a mortgage statement you’ll receive every month, you’ll also be mailed a coupon book at the beginning of your mortgage servicing.
MERS Servicer Identification System
The MERS® Servicer ID is a free service where you can find the name of your servicer or mortgage note holder. You can call 888-679-6377 or input your information online .
To find your servicer with this system, you’ll need to provide one of these three things:
• Property address
• Borrower name and Social Security number
• The unique mortgage identification number
Before mortgage servicing is even a thought, you’ll need to find a mortgage. And that means finding the right lender.
As you shop around, take a look at SoFi’s home loans with flexible terms and competitive rates.
SoFi’s help center for mortgages covers everything from home-buying basics to calculators, refinancing questions, and first-time homebuyer tips.
Why do I need a mortgage servicing company?
A mortgage servicing company ensures that your payments get to the right parties. Many mortgages are not held by the lending institutions that originated them; instead, they’re sold as investments on the secondary mortgage market.
If that’s the case, your mortgage payment will be sent to the institution that bought it, which is often Fannie Mae, Freddie Mac, or Ginnie Mae; the mortgage servicing company keeps a small percentage.
Money held in escrow by the mortgage servicing company, including taxes, homeowners insurance, and any mortgage insurance premiums, will be paid by the mortgage servicer.
Can my mortgage servicer change?
Yes. Your mortgage servicer may transfer the mortgage servicing rights for your loan to another company.
Your old servicer generally should send a notice at least 15 days before the transfer of the servicing rights, and your new servicer will send a notice within 15 days afterward, unless it was combined with the first notice.
Is my mortgage servicer different from the lender?
Often, yes. Your mortgage servicer can be the same company as the one that originated your loan, but it’s not unusual for another servicer to take over the management of payments.
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