What’s the Difference Between a Mortgage Lender and Mortgage Servicer?
Your original mortgage lender probably won’t be with you for life
If you’re like most homeowners who financed their property, then you’ll likely encounter two parties handling your mortgage. First, you’ll work with a lender, and then you’ll have a mortgage servicer.
The mortgage lender is the company you applied to for your loan and the one that lent you the money. It might be a bank, credit union, or dedicated mortgage company.
The servicer, on the other hand, is the company charged with handling the management of your mortgage. It’s the one that will send your mortgage statements and bills, process your payments, and respond to any questions or concerns you might have. They also manage your escrow account. In some cases, mortgage lenders may service their own loans.
Not sure who your servicer is? Try the MERS ServicerID tool to find out. Have your loan number on hand, if possible.
Why Two Companies?
In many cases, lenders specialize in the origination of the loan, but they’re not equipped to handle the day-to-day administrative tasks that come with a mortgage. Instead of managing these duties in-house, they transfer (or sell) the servicing rights of their loans to a designated servicer—a company that specializes in the actual management and administration of mortgages.
It can be frustrating to learn that your mortgage has been transferred or sold, especially without your input or consent. After all, you probably spent valuable time and energy researching lenders, and you were hoping to have that chosen lender for the long haul.
Fortunately, the sale of your loan doesn’t have to be scary. You should get a notice of the transfer in the mail, detailing your new servicer’s name and payment address, as well as the date you’ll need to start working with it. Your payment, loan terms, and other details will remain the same.
The transfer of servicing rights is very common. You might even see your mortgage transferred several times over the course of your loan.
What Does a Mortgage Servicer Actually Do?
Your servicer is in charge of managing the details of your loan. It is who you’ll send your payments to, and it’s also who you’ll call if you have questions or if problems arise.
The general duties of a mortgage servicer include:
- Accepting and processing payments
- Tracking balances and interest paid
- Managing escrow accounts
- Making property tax and insurance payments via escrow
- Responding to borrower questions
- Initiating foreclosure, in some cases
In the event you want to cancel your private mortgage insurance (PMI), you would do that through your servicer, as well. Check your PMI disclosure form for the date you’ll be eligible to cancel, or contact the servicer directly for more information.
What to Do When You Have a New Servicer
If you’ve recently received notice that your loan has a new servicer, there are a few steps you should take to protect yourself.
- Review the notice carefully. Check your transfer notice for any errors or omissions. If you spot any, you’ll want to notify the servicer and get these corrected ASAP.
- Update any automatic payments you have set up. Make sure you change the payment address to your new servicer’s.
- Check with your homeowner’s insurance. If your homeowners insurance premiums are paid out of an escrow account, you’ll want to make sure the insurance company knows of the loan’s transfer. Contact your agent and give them the new servicer’s info. (The servicer may have done this already, but it doesn’t hurt to check.)
When your loan is transferred, you have a 60-day grace period on payments. This means that if you accidentally pay your old servicer instead of your new one, you won’t get hit with a late fee or other penalties.
Mortgage lenders often transfer the servicing rights of loans. It’s common and not something to fear.
When your loan is transferred to a new servicer, your loan terms and payment will remain the same, but the payment address will change. Make sure to update any autopayments you have set up.
Your mortgage may be transferred several times during the course of the loan term. You should always receive notice ahead of time and will have a 60-day grace period any time a transfer is made.