A mortgage servicer is a company that manages a home loan; they may send your statement and collect and process your payment every month, as well as provide customer support.
A mortgage servicer is often different from your lender, or the institution that approved your application and loaned you the funds to buy your property.
To help you understand 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 necessarily the same 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.
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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.
On the borrower’s side, here’s how it works: One company gives 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.
Recommended: What Is Mortgage Underwriting?
Which Parties Are Involved in Mortgage Servicing?
Mortgage servicing has a few layers.
Servicer
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 (homeowners association) dues, etc.
Lender
When it comes to mortgage servicer vs. mortgage lender, 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.
Investor
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 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.
Maintain Escrow Accounts
Mortgage servicing companies are also responsible for maintaining escrow accounts.
They will take your mortgage payment, which is usually 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.
Keep 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.
💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
Do I Need to Know Who My Mortgage Servicer Is?
Yes, it’s good to have this information. 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.
Recommended: 6 Simple Ways to Reduce Your Mortgage Payment
How to Find Out Who Your Mortgage Servicer Is
There are several ways to find out who your mortgage servicer is. Here’s where to look:
Billing Statement
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 typically 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
The Takeaway
A mortgage servicer handles the day-to-day management of a mortgage, sending out statements and collecting payments, for instance. They are an important part of making sure a home loan runs smoothly.
Before mortgage servicing is even a thought, you’ll need to find a mortgage. And that means finding the right lender.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
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.
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.
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.
Photo credit: iStock/LaylaBird
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