If you have questions about your home loan, who should you call? After you close on a mortgage loan, the servicer is your primary contact for questions about your account and foreclosure alternatives.
A "loan servicer" or "mortgage servicer" is the company that handles your loan account. The mortgage servicing company might be the loan's owner, or it might be another company.
Here are a few of the main parties involved in residential mortgage servicing.
The lender or "originator" is the bank or mortgage company that lent you the money when you took out your home loan.
Often, the originator (the original owner of the loan) will sell the loan to a new owner, called an "investor."
The servicer is the company that manages your loan account. In some cases, the loan owner is also the servicer.
Other times, the owner sells the right to service the loan to another company, separate from the underlying loan. This sale is called a "transfer of servicing rights." After a mortgage servicing transfer, in most cases, your old and new mortgage servicers must give you notice of the transfer.
That servicer might then hire a vendor, called a "subservicer," to take on the mortgage servicing duties, rather than servicing the loan itself. The servicer (or subservicer) administers the loan account on behalf of the owner for a fee.
In the past, servicers were almost always banks. Now, though, the servicer might be a bank or a non-bank specialty servicing company.
Among other activities, the servicer usually:
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 (the 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 detailing the activity in your account.
If you apply for an alternative to foreclosure (called "loss mitigation"), the servicer will review your paperwork. Various federal and state laws provide timelines and requirements for the servicer.
The mortgage servicer provides monthly billing statements to borrowers, contacts slow payers, answers questions about the account, and sends payoff statements when borrowers request them.
Lenders often require the borrower to pay private mortgage insurance (PMI). The loan servicer collects and distributes the premiums for PMI.
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.
The servicer will manage the foreclosure process if the borrower falls behind in payments and can't work out a loss mitigation option.
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 mortgage servicing fee. Generally, the amount depends on the underlying credit quality of the borrower.
Servicing a loan with a higher quality credit rating brings in fewer fees because mortgage servicing costs are lower. Servicing a loan with lower credit quality (a subprime loan) generates a higher fee because borrowers tend to default on this type of loan, making them more labor-intensive. 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.
When handling loan accounts, servicers sometimes make errors by:
Here are a few ways you can discover your servicer's identity.
Your billing statement will come from the servicer of the loan. It will have the servicer's contact information, like the phone number and website.
If you received a set of preprinted payment stubs in a payment coupon book, each stub 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 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 your servicer makes an error or you need information about your loan account, you may call or write a letter to the servicer—though you'll get more legal protections if you write a letter. Under the federal Real Estate Settlement Procedures Act (RESPA), if you send a written "notice of error" or "request for information," the servicer has to respond to your letter within specific time limits.
If writing to your servicer doesn't get you anywhere or if you're facing an imminent foreclosure due to a servicer's mistake, consider talking to a foreclosure attorney who can advise you on what to do in your particular situation. You might have a defense that could stall the process or force the servicer to start the foreclosure over.