With an online mortgage, all or many of the steps in the lending process can be completed electronically.
What is a servicer?
A servicer is a company that collects and handles all transactions on your mortgage account on a day-to-day basis. Although some lenders service mortgages themselves, many contract with an independent mortgage servicer who assumes the responsibility for handling receipts and payments, and is the contact point between the loan provider and the borrower.
The administration of mortgage loans is relatively complex because of the payments that have to be made. These include:
- Receipt of mortgage payments.
- Remittance of payment to lender.
- Payment of homeowner’s insurance.
- Payment of private mortgage insurance.
- Payment of taxes.
- Management of escrow account.
- Preparation and distribution of monthly statements.
Many lenders contract this service out to loan servicers. In return for performing this service, the servicers are paid a fee that is usually 0.25 percent to 0.5 percent of the periodic interest on the loan.
The servicing of a mortgage loan should be transparent as far as the homeowner is concerned. The homeowner makes the mortgage payment to the loan servicer and not to the original lender. If an error occurs or the homeowner falls behind and needs to make arrangements to rectify the matter, he or she must contact the loan servicer and not the lender.
Loan servicers are required to provide homeowners with their names, addresses and contact details. If there is a change of service, the homeowner must be given 15 days notice before the change, and within 15 days of the change, the new servicer must notify the homeowner of the transfer.
David was recently told that the servicing of his mortgage loan would be taken over by a new servicer. The notice informed him that the change would take place at the end of the current month. The notice provided him with the name and contact address of the loan servicer and their call center telephone numbers.
At the end of the month, he received a statement from the new loan servicer. Because he had been warned to carefully check his statement, he did so. He discovered his insurance premiums had not been paid. He contacted the new servicer, who rectified the error.
Are you planning to buy a new home but unsure of which lender to use? Use Bankrate’s mortgage lender review to choose the lender with the highest overall rating in your area.