When you purchase a home, there are countless moving parts to consider as you head from contract to closing – including hammering out the details of your mortgage with your lender. In this rush, it’s easy to get caught up on everything happening in the present tense, and put off looking to the future.
Eventually, though, things will settle down, and your mortgage payments will go from something new and exciting, to an obligation that routine and predictable – until something goes wrong. Before you’re hit with any surprises, it’s important to take some time to get to know more about your mortgage servicer, the company handling all of the day-to-day aspects of your mortgage.
Mortgage Servicers Vs. Mortgage Lenders: Understanding the Difference
For borrowers, you’ll get your initial mortgage loan through a mortgage lender. Your mortgage lender is the financial institution that loaned you the money to purchase the home. Your mortgage servicer is the company that sends you your monthly mortgage statements, and oversees all of the day-to-day tasks that go into administering your loan.
As the Consumer Financial Protection Bureau (CFPB) notes, these routine management operations include:
- Processing loan payments
- Responding to inquiries
- Keeping track of principal and interest paid
- Managing mortgage escrow accounts
- Sending notices of missed payments
- Initiating and overseeing foreclosures, and reviewing loss mitigation applications
In some cases, your mortgage lender and your mortgage servicer may be one and the same. But this is not always the case! Often, a mortgage servicer is a third party company that has been sold the right to service the loan by the mortgage lender. In other cases, your initial lender may bundle and sell your mortgage to a new holder or investor, who then hires another mortgage servicer entirely. It is quite common for mortgages to be sold, as this allows financial institutions to issue new loans and increase their profits on the back of a historically stable investment. As a result, it is quite common for homeowners to interface with multiple mortgage servicers over the life of a loan.
Learning More About Your Mortgage Servicer
As a consumer, it’s important to know who your mortgage servicer is. After all, this is the company that you’ll be interacting with if you have questions about your loan, or if you ever miss payments and face the possibility of going into default (or foreclosure).
In order to find out who your mortgage servicer is, you can check your monthly mortgage statement or payment coupon book, which should have the servicer’s name and contact information clearly visible. If you don’t have any old statements or coupon books handy, or you want to learn more about your servicer, the CFPB recommends using the MERS® Servicer Identification System, available by phone or online. As the CFPB explains, “MERS is a private company that maintains information about mortgage loans and servicers,” which can help you identify the servicer associated with your loan.
Changing Servicers: What You Need to Know
It’s important to keep in mind that, as a homeowner, you have no choice in who services your loan. This decision is down to your lender, which decides whether to service the loan internally, select a third party servicer, or sell the mortgage to another bank or investor, which can then select its own servicer.
However, while you may not have any ability to control who oversees the administration of your loan, you do have rights – including being notified when there’s a change of servicers.
When you initially close on the home, for instance, “your lender must inform you of any plans to turn over the rights to administer your loan to a mortgage servicer,” as the consumer information site Bankrate puts it. Down the line, you must also be given proper notice in any change of servicer. You must be given notification in writing, with a date of transfer and contact information for the new servicer. The new servicer must inform you of any changes to your homeowner’s insurance, and “must honor the terms and conditions of your original mortgage agreement, with the exception of those directly related to servicing the loan,” per Bankrate.
After your service is transferred, it may help to take some time to reach out to your new servicer with any questions or concerns, particularly if you notice any errors or discrepancies on your first mortgage statement. Keep in mind that you are also granted a grace period that protects you from late fees in the event that you accidentally send a payment to your old servicer. As HuffPost explains:
“Mortgage companies have a legal obligation to protect consumers during loan transfers between mortgage servicers. That means paperwork should not be lost, servicers should not lose track of a homeowner’s loss mitigation plans, and they should not hinder a consumer’s chance to save his or her home from unnecessary foreclosure.”
Want to Keep the Conversation Going?
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