If you have questions about your home loan, who should you call? After you close on a mortgage loan, your primary contact for questions about your account—and to ask about foreclosure alternatives—is your loan servicer.
The mortgage servicer (also called a "loan servicer") is the company that handles your loan account. The servicer might be the loan owner, or it could be a different company. (To get basic information about servicers, see What's a Mortgage Servicer?)
Here are the main duties of a mortgage servicer:
The foremost responsibility of a mortgage servicer is to collect payments from borrowers. The servicer then distributes ("remits") the part covering interest and principal to the lender or its successor (called an "investor"), and distributes escrow funds into the escrow account, if one exists.
Most mortgages and deeds of trust allow the lender to collect money (called "escrow funds") from the borrower—usually monthly—to pay real estate taxes and homeowners' insurance for the secured property. By collecting escrow funds and paying the insurance and tax bills when due, the lender ensures that the security (the home) doesn't accumulate liens for unpaid real estate taxes and is protected from loss due to fire or other hazards.
The lender usually delegates the right to collect escrow funds and pay the bills to the loan servicer. If you have an escrow account, your loan servicer will send you an annual statement with details about the activity in your account.
The mortgage servicer sends monthly billing statements to borrowers, contacts slow payers, answers questions about the account, and sends payoff statements when borrowers request them.
The servicer manages the property if the borrower abandons the home. Most mortgages and deeds of trust give the lender the right to do whatever is reasonable or appropriate to protect its interest in the property, like entering the property to make repairs or changing the locks, if the borrower permanently moves out of the home.
Lenders often require the borrower to pay private mortgage insurance (PMI). The loan servicer collects and distributes the premiums for PMI.
The loan servicer also accepts prepayments, reviews borrowers' loss mitigation (foreclosure avoidance) applications, and manages the foreclosure process when borrowers fail to make payments.
In return for performing these duties, the mortgage servicer generally receives a fee out of the cash flow from each loan it services.
When the servicer handles loans for one of the quasi-governmental agencies, Fannie Mae or Freddie Mac, the applicable agency determines the fee. But if a private investor owns the loan, the market drives the servicing fee. Generally, the fee depends on the underlying credit quality of the borrower. Servicing a loan with a higher quality credit rating brings in fewer fees because servicing costs are lower. Servicing a loan that has lower credit quality (a subprime loan) generates a higher fee because borrowers tend to default on this type of loan, which makes them more labor-intensive to service. The mortgage servicer steps in and tries to help the borrower avoid foreclosure, as well as handle a foreclosure if needed, which means more work for the servicer.
Lenders often sell the loans that they originate to generate income so that they can turn around and make more loans. Mortgage loan servicing rights, too, are also often bought and sold, separate from the underlying loans. After a servicing transfer, in most cases, your old and new mortgage servicers have to give you notice of the transfer.
Here are a few ways you can find out the identity of your mortgage servicer.
Your billing statement will come from the servicer of the loan. It will have contact information, like the phone number and website, of the mortgage servicer.
If you received a set of preprinted payment stubs in a payment coupon book, each stub in the book indicates the due date, account number, and the amount due. With each payment, you detach the stub and send it to the servicer. The book will also likely contain contact information for the servicer.
If you have a MERS loan, your servicer's name will be listed in the MERS Servicer ID system. Look on your mortgage or deed of trust to see if it has an 18-digit MIN or "Mortgage Identification Number." Then call visit the MERS website or call 888-679-6377. You can use the MIN to find the mortgage servicer. You can also search by property address or by entering borrower information and a property address.
You don't get to choose your mortgage servicer. You get to pick a lender when you take out the loan, but after you sign the paperwork, you don't get any say in who the lender sells the loan to or who services it.
If you think your loan servicer isn't treating you fairly and you're not in imminent danger of foreclosure, you may file a complaint with the Consumer Financial Protection Bureau (CFPB). The CFPB will work as an intermediary on your behalf by not only submitting the complaint to the servicer but by following up to resolve the problem, as well.
If you think your loan servicer is violating the law while servicing your loan and you're facing a foreclosure, consider talking to an attorney. You might have a defense that could stall the process or force the servicer to start the foreclosure over.