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Most borrowers use the term “mortgage lender” to cover all parties involved in their home loan. Oftentimes, though, the actual lender only handles the beginning part of the mortgage process. It’s pretty common for your lender to hand over your loan to a mortgage loan servicer after closing.
The difference between mortgage lenders and mortgage servicers
Mortgage lenders are financial institutions or groups of investors that provide money borrowers use to buy or refinance homes. A mortgage loan servicer, on the other hand, takes care of the loan’s day-to-day administration until the borrower pays it off.
Some lenders do their own mortgage servicing, but many aren’t large enough to deal with loan servicing profitably. These lenders often hand that task off to a mortgage servicing company.
What do mortgage lenders do?
Mortgage lenders handle the origination and funding of the loan. The origination process includes:
- Helping borrowers choose a home loan
- Taking the mortgage application
- Processing the loan
- Underwriting the loan
- Drawing up loan documents
- Funding the mortgage
- Closing the loan
Once the loan closes, it will require ongoing administration, or servicing, until it’s paid off, so many lenders transfer it to a mortgage servicing company. Your closing documents may indicate that your loan is to be transferred or you may be notified of the transfer after closing.
What do mortgage servicers do?
The mortgage loan servicer picks up where the mortgage lender leaves off. Once the loan is transferred, the servicer takes over the ongoing administration of the loan.
Mortgage servicing can include:
- Taking and processing payments
- Tracking your loan balance and interest paid
- Generating tax forms showing how much interest you paid each year
- Managing escrow accounts (collecting and paying property taxes and homeowners insurance)
- Initiating foreclosure if the borrower defaults
- Performing loss mitigation to prevent foreclosure, in some cases
- Processing requests to cancel mortgage insurance
Your mortgage loan servicer might also report your loan payment history to the credit bureaus. If you suspect an error, contact your loan servicer, not your mortgage lender, to get it corrected.
How to find your mortgage servicer
Your loan servicer may change more than once during the life of your mortgage. You should be able to find your current servicer on your mortgage statement, either mailed to you or online.
You can also contact your mortgage lender and ask where your loan was transferred. Another option is the Mortgage Electronic Registration System, or MERS. If your loan is registered with MERS, you’ll be able to find it by searching your property address or name and Social Security number. You can call toll-free at 888-679-6377 or visit the MERS website.
What happens when my loan moves to a new servicer?
Transferring the loan to a mortgage servicer does not change the terms of your mortgage — you’re simply sending your payment to a different recipient, and you might get a new account number.
When your lender transfers your loan to a mortgage loan servicer and you were not notified at closing, you’ll receive two letters: a “goodbye” letter from your mortgage lender and a “hello” letter from the mortgage servicing company.
In most cases, your mortgage lender must send the letter at least 15 days before the effective date of the transfer. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer must send their letter within 15 days following the effective date of the transfer.
Occasionally, you’ll get one letter from both the new and old company. If that’s the case, you must get it at least 15 days before the transfer takes place.
Both notices will contain:
- The name and address of the new servicer
- The date the mortgage lender will stop accepting your mortgage payments
- The date the new servicer will begin accepting your mortgage payments
- Telephone numbers for the old lender and new servicer
- A statement that the transfer does not change the terms of your mortgage
- A statement explaining your rights, and what to do if you have a question or complaint about the servicing of your loan
Keep in mind that for 60 days after the transfer, you cannot be charged a late fee if you mistakenly send your mortgage payment to the lender instead of the servicer.
Can you change your mortgage servicer?
Ideally, a good servicer keeps accurate records, is easy to contact and has helpful staff for things like canceling mortgage insurance, avoiding foreclosure and answering questions. Unfortunately, you don’t get any say in the company that services your loan.
If you have issues with your current loan servicer, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
If you want to avoid mortgage servicing companies, you can choose to deal only with lenders that service their own loans. By law, lenders must provide a Mortgage Servicing Disclosure Statement when you apply, which tells you whether they intend to service the loan or transfer it to another lender. That disclosure also includes information about complaint resolution.