A mortgage servicer is a company that handles the day to day responsibilities for your mortgage loan account. This company is involved from the time the loan is processed until the loan is completely repaid.
A few responsibilities of a mortgage loan servicer include collecting monthly payments, sending payment reminders, as well as initiating foreclosure when necessary.
Mortgage loan servicing may be the same financial institution, such as the bank, that loaned you the money. However, it may also be a non-bank entity or a third party that functions as a mortgage subservicer on behalf of your lender.
Mortgage loan servicers make money by keeping a small percentage of each loan payment. This servicing fee may range from 0.25% to 0.5% of your loan’s interest payment.
The Consumer Financial Protection Bureau (CFPB) stipulates mortgage servicing rules in the Truth and Lending Act and the Real Estate Settle Procedures Act. The rules are in Regulations Z (12 CFR 1026) and X (12 CFR 1024).
Regulation Z protects people that use consumer credit, while Regulation X protects applicants and holders of mortgage loans. The CFPB continuously revise and amend rules.
In March 2018, the Bureau of Consumer Financial Protection revised the timing requirements for mortgage loan services transitioning between modified or unmodified periodic statements and coupon books during a consumer’s bankruptcy in Regulation Z.
The Bureau made some amendments to Regulation X in August 2016. These amendments addressed force-placed insurance notices, policies and procedures, early intervention, and loss mitigation requirements.
A mortgage lender is the bank or credit union that funds your loan. The borrower will owe the lender the amount that he or she borrowed, plus interest. Each month the borrower will pay the lender a portion of the principal and interest owed.
The mortgage lender may hire another company to handle the administrative day to day responsibilities of the loan, such as processing the monthly payment. This company is known as a mortgage servicer.
One way to find out whether your mortgage lender and servicer are one and the same is by checking the top of your monthly mortgage statement. If the return address is not the same as the bank that issued your loan, a mortgage loan servicer may be handling your mortgage.
Selling mortgages on the secondary mortgage market allow banks to originate new loans. In many cases, it is more profitable for banks to issue loans than to service old ones.
If your bank sells your mortgage to a service company, you must be notified of your new mortgage loan servicer’s name, address, and telephone number within 30 days. You would then send your monthly payments to this new address.