The Difference Between a Mortgage Lender and Servicer
When obtaining a home loan in Albuquerque, selecting a lender is the first step. A lender can refer to all parties involved in the loan process from the borrower's perspective, but in actuality, they do not handle all aspects.
Mortgage servicers may take over the loan after closing and handle day-to-day administration until it is paid off. Mortgage lenders can be a group of investors or a financial institution that provides funds to borrowers for purchasing or refinancing homes.
Some lenders service their loans, but most are too small to make a profit doing so, which is where a loan servicing company becomes part of the situation.
The Role of a Mortgage Lender
Mortgage lenders are responsible for the origination of loans. This process involves working with homeowners to select a loan, taking their application, and processing the loan. Additionally, the origination process includes underwriting the loan, creating the necessary documents, funding the mortgage, and ultimately closing it.
After your loan closes, the administration is needed on an ongoing basis until it’s paid off. This administration is known as servicing.
When you obtain a mortgage, the lender may transfer it to another company for loan servicing. This transfer may occur without prior notification, but the loan documents should indicate whether it will occur.
What Is a Mortgage Servicer?
Mortgage servicers are responsible for taking over tasks that lenders may leave unfinished. As a borrower, it is important to note that the servicing of a loan includes payment processing, which means that you are paying the servicer directly. Additionally, mortgage servicing involves keeping track of loan balances and interest payments. It is worth noting that your servicer will provide you with tax forms that show how much interest you have paid each year.
The servicer is responsible for managing your escrow accounts, which includes collecting and paying your homeowners' insurance and property taxes. In the event of a loan default, the servicer initiates the foreclosure process.
Additionally, servicers can provide loss mitigation services to help borrowers avoid foreclosure. If you wish to cancel your mortgage insurance and have a loan servicer, you must go through them to make the request.
Mortgage servicers can report the payment history on loans to credit bureaus, so if you think there’s been an error, you will contact this company rather than your lender.
Finding the Servicer on Your Mortgage
It's common to have multiple servicers throughout the life of a home loan. To find out who your servicer is, check your mortgage statement or contact your original lender. Another option is to use the Mortgage Electronic Registration System (MERS), which allows you to search for your loan online using your property address, name, or Social Security number.
When a mortgage is transferred to a servicer, the terms of the loan remain the same. The only difference is that you may receive a new account number and your payments will be sent to a different entity than your original lender.
When it comes to mortgages, your servicer can greatly impact your experience as a borrower. A good servicer will have reliable customer service and be easily accessible for any questions or concerns you may have. Unfortunately, you don't have the option to choose your servicer or switch to a different one. Your only option is to file a complaint with the Consumer Financial Protection Bureau or work with a lender that services its own loans if you're unhappy with your servicer.
Finally, when applying for a mortgage, lenders must provide a Mortgage Servicing Disclosure Statement. This statement informs you whether the lender plans to service the loan themselves or transfer it. It is a legal requirement for lenders to provide this information.
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