The mortgage servicer is the company that collects your monthly
payments. That company is not necessarily the lender that made the
When the servicer receives your payment, it distributes the
- Principal and interest go to the bank or the investor that owns
- Taxes go to the government.
- Homeowners insurance premiums go to the insurer.
- Mortgage insurance premiums go to the mortgage insurer.
- Condo or homeowners association dues go to the
- Any other fees are disbursed to wherever they’re supposed to
Other duties of the servicer
Besides collecting payments and distributing the money, the
- Sends you an annual mortgage statement that details which
portions of your mortgage payments were applied to principal,
interest, taxes and insurance, and any adjustments in payments to
cover taxes and insurance in the coming year.
- Counsels and helps you to overcome delinquencies if you miss
loan payments. For instance, a forbearance, or deferral of
principal and interest payments, may be extended to help you out of
financial difficulties. If the loan becomes seriously in default,
foreclosure might be necessary to protect the investor’s interest
in the property and salvage the borrower’s equity, if any.
When there’s a change of servicers
At closing, your lender must inform you of any plans to turn
over the rights to administer your loan to a mortgage servicer, as
often happens when a mortgage is sold. The new servicer could be
another lender, a bank, an investor or a third-party processing
company that specializes in servicing mortgages. Over the term of
your loan, you may have several mortgage servicers.
Rules of servicer changes
- You must be notified in writing of the change by your original
servicer and the new one, noting the date of transfer and contact
information of the new servicer.
- The new servicer must honor the terms and conditions of your
original mortgage agreement, with the exception of those directly
related to servicing the loan.
- You must be notified of any changes to terms of your homeowners
- During the transfer, you have a 60-day grace period during
which you cannot be charged a late fee if you mistakenly send a
mortgage payment to your old servicer.
- You may ask any questions or voice any disputes you have with
the new servicer in writing and continue to make payments while you
settle the dispute.
- Federal law requires the servicer to investigate your disputes
and make any corrections within 60 business days.
Be careful if the servicer is changed
After your mortgage servicer has changed, carefully examine your
mortgage statements, making sure all payments have been recorded
and taxes and insurance premiums have been paid on time. Retain
copies of letters, canceled checks and other paperwork relating to
your mortgage and payments in case you need to document any