What is a mortgage servicer?

What does a mortgage servicer do?

While a lender owns your loan, a mortgage servicer owns the mortgage servicing rights and handles loan management tasks associated with your mortgage. These tasks include collecting monthly payments, tracking principal balance and interest, managing escrow accounts and providing customer service.

The primary job of a mortgage servicer is to collect and manage payments. That means ensuring your loan is paid on time, applying payments toward principal, interest, taxes and private mortgage insurance (PMI) and tracking your balances and payment history.

Servicers are also responsible for reporting account activity to credit bureaus, and they handle delinquencies and foreclosures in the event of non-payment. A mortgage servicer may offer solutions to get you back on track in the case of a default. Otherwise, it will initiate foreclosure proceedings and manage the property through that process.

» READ MORE: How to get rid of PMI

Mortgage lender vs. servicer

A mortgage lender is the company with which you secure your loan, so if you go through Chase, Wells Fargo, Bank of America or Rocket Mortgage when purchasing a home, that’s your mortgage lender. Your lender originates the loan and funds the purchase of the home, and it’s the company to which you are indebted.

When one of these companies secures a loan, it also secures the servicing rights, which means it’s responsible for everything that a standalone servicer does. In many cases, mortgage lenders sell the loan or debt obligation to a secondary mortgage company, like Fannie Mae or Freddie Mac. Your original lender can keep the servicing rights or sell them separately.

There are three main scenarios that can happen after you finalize your mortgage:

• Your lender maintains the debt obligation and the servicing rights, in which case the company you took your loan from is the only one with which you’ll interact.
• Your lender sells the servicing rights only, in which case you’ll interact with the servicer, but your initial lender still owns the debt obligation.
• Your lender sells the debt obligation to a secondary mortgage company and sells the servicing rights to a standalone servicer, in which case you’ll interact with the servicer, and your initial lender is no longer a part of the equation.

Lenders sell servicing rights for many reasons. It frees up time and resources, it provides some liquidity for the mortgage upfront and it reduces risk by allowing the lender to sidestep the heavy regulations regarding escrow laws, foreclosure proceedings and consumer protection.

While lenders employ mortgage loan officers and underwriters, selling the servicing rights to mortgages means they don’t have to hire customer service representatives, escrow managers and compliance experts.

How to find a mortgage servicer

Knowing your mortgage servicer can help avoid confusion, ensure your payment gets to the right place and give you a single point of contact in case you have questions or concerns regarding your loan. Here’s how you can identify your mortgage servicer.

Check your most recent mortgage statement

The easiest way to find out which company services your mortgage is to check your most recent statement. Two of the primary functions of a servicer are to send statements and collect payments, so your statement will come from your servicer. Note that this could also be your lender, as lenders can retain the servicing rights for your loan.

Keep an eye out for loan transfer notices

Lenders are required by law to notify you in writing at least 15 days before a mortgage service transfer occurs, and servicers must also notify you in writing separately within that timeframe. If you file away documents regarding your mortgage that come in the mail, check them to see if your lender notified you about a new servicer.

Use a free servicer lookup tool

You can use the Mortgage Electronic Registration System (MERS) to look up your servicer. MERS is a private company that maintains lender and servicer records, so you may be able to identify your servicer using this system. You can use the MERS online lookup tool or call the toll-free number at 888-679-6377.

Check your credit report

Your credit report includes information about your open credit accounts, so it will list your mortgagee. Note that your mortgagee or lender may not be your servicer, but it will be if your lender hasn’t sold the servicing rights.

Ask your lender

Finally, you can ask your mortgage originator, which is the company from which you originally borrowed money. The originator may be able to direct you to your servicer, or it may disclose which company bought the debt obligation if it sold your loan. You can then contact that secondary lender to see which company owns the servicing rights.

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What to do if your loan is transferred to a new servicer

Understanding what to do when your lender sells servicing rights for your mortgage is crucial, as it ensures you send payments to the right place and know what company to contact if you have questions or need assistance. Here’s what to do if you’re notified of a servicer change.

1. Make sure your old servicer has up-to-date contact information for you, as that’s the info your new servicer will use to contact you.
2. The notice you receive should include a date after which you should send payments to the new servicer. Make sure all payments after that date go to the new servicer.
3. Contact your bank to cancel automatic payments to your old servicer, or change automatic payments to your new servicer.
4. Check your new statements diligently after the transfer to ensure your payments are getting to the right place.
5. Understand that you have a 60-day grace period when your loan transfers to a new servicer, so if you send a payment to the old servicer by mistake, you have two months to correct the issue.

If you have problems with your servicer, you’ll have to contact it directly to sort out the issue. In the event that your servicer makes an error, you must send it a “qualified written request” notifying it of the mistake. Your servicer must acknowledge receipt within five business days and come to some resolution within 30 business days.

Pros and cons of mortgage servicers

You don’t have control over whether your lender sells the servicing rights to your loan, nor do you have control over whether you’re transferred to new servicers thereafter. However, it’s still helpful to understand some pros and cons of mortgage services, as they’re key parts of the mortgage industry.