The difference between a mortgage lender and a mortgage servicer

Why Are There Two Companies?

The mortgage lender provides you with the loan and gives you the funds. This company may be a bank, a credit union, or a company specialized in mortgages.

The mortgage servicer, on the other hand, is the company responsible for managing your mortgage loan. This is the entity that will send you mortgage statements and bills, process your payments, and respond to any questions or inquiries you may have. They also manage your escrow account. In some cases, mortgage lenders may service their loans themselves.

Note: If you are unsure who your mortgage servicer is, you can use the MERS ServicerID tool to find out. Try to have your loan number handy.

Why Are There Two Companies?

In many cases, lenders specialize in originating loans, but they are not equipped to handle the daily administrative tasks associated with mortgages. Instead of managing these tasks in-house, they transfer (or sell) their loan servicing rights to a specialized company – a company that specializes in managing and servicing mortgages.

It can be frustrating to learn that your loan has been transferred or sold, especially without your consent or involvement. After all, you may have spent valuable time and effort researching lenders and hoped to have the lender you chose for a long time.

Fortunately, the sale of your loan is not a scary thing. You should receive a notice of the loan transfer by mail, outlining the name of the new servicer and payment address, as well as the date you will need to start dealing with them. Your payments, loan terms, and other details will remain the same.

Note: Transferring loan servicing rights is very common. You may even see that your loan has been transferred multiple times during the life of the loan.

What Exactly Does a Mortgage Servicer Do?

The mortgage servicer handles the details of your loan. This is who you will send your payments to, and it’s also who you will contact if you have any questions or if issues arise.

The general tasks of a mortgage servicer include:

• Accepting and processing payments
• Tracking balances and interest paid
• Managing escrow accounts
• Paying property taxes and insurance through escrow
• Responding to borrower inquiries
• Initiating foreclosure proceedings, in some cases

If you wish to cancel your mortgage insurance, you must contact the mortgage servicer. Check your insurance disclosure form to find out the date you will be eligible for cancellation, or contact the mortgage servicer directly for more information.

What to Do When You Have a New Servicer?

If you recently received notice that your loan has a new servicer, there are some steps you should take to protect yourself.

• Carefully review the notice: Check your transfer notice for any errors or discrepancies. If you notice any errors, you will want to inform the servicer and correct them as soon as possible.
• Update any automatic payments you have set up: Make sure to change the payment address to the new servicer.
• Check your homeowners insurance: If your homeowners insurance premiums are paid from an escrow account, you will want to make sure the insurance company is aware of the loan transfer. Contact your insurance agent and provide them with the new servicer’s information. (The servicer may have already done this, but it doesn’t hurt to check.)

When your loan is transferred, you have a 60-day grace period for payments. This means that if you accidentally pay the old mortgage servicer instead of the new one, you will not incur late fees or other penalties.

Main Takeaway:

• Mortgage lenders often transfer loan servicing rights. It is a common practice and not a topic to be feared.
• When

Transfer your loan to a new service, the terms of the loan and payments will remain the same, but the payment address will change. Make sure to update any automatic payments you have set up.

• Your mortgage may be transferred several times during the life of the loan. You should always receive prior notice, and you will have a grace period of 60 days any time a transfer occurs.

Was this page helpful?

Thank you for your feedback! Let us know why! Other

Sources:

Consumer Financial Protection Bureau. “What’s the Difference Between a Mortgage Lender and a Servicer?”

Consumer Financial Protection Bureau. “What Happens If the Company That I Send My Mortgage Payments to Changes?”

Source: https://www.thebalancemoney.com/mortgage-lender-vs-mortgage-servicer-4779058