Homeowners

Who's This Company Asking for My Home Loan Payment? Mortgage Servicing Explained

You sign the paperwork, get your keys, and move into your new home. Next thing you know, you receive an envelope in the mail with your mortgage statement, directing you to pay a company that may be different from the one that handled your mortgage.

So, why are you sending a payment to a company you haven’t heard of? This is your mortgage servicer, a company that typically takes over handling the loan after it has closed.

The mortgage servicer is the company you will contact if you have trouble repaying your loan or need a modification. They also typically oversee your escrow account.

“Mortgage servicing is everything that takes place on your loan after closing and until the loan is paid in full,” said Roger Stotts, chief servicing officer at New American Funding.

The difference between a mortgage servicer and a mortgage lender

Your mortgage lender is often different from your mortgage servicer, although some lenders also service the loans they make. Other lenders sell the servicing rights on their mortgages (the right to collect the payments, etc.) to servicers to free up money to make new loans.  

“A mortgage lender makes and closes the loan while the mortgage servicer manages the loan for the borrower for the life of the loan,” said Stotts.

A mortgage servicer is responsible for tasks like collecting your monthly payment, managing your escrow account, paying your taxes and insurance, and answering any questions you have regarding your account for the life of the loan.

The servicer is also charged with taking necessary legal actions if the homeowner stops making their monthly mortgage payments.

How to figure out who your mortgage servicer is

Mortgage servicers can change multiple times over the course of a home loan. That’s because servicing rights often get sold to new companies. This can sometimes be confusing for homeowners who are asked to send their mortgage payments to different organizations.

“[Typically,] the borrower is advised who will be their servicer and where they make their first payment at loan closing,” said Stotts.

He stressed that the borrower must be notified at least 15 days prior to their loan being transferred to a new servicer.

If at any point you need to find out who your mortgage servicer is, you can do so by checking your monthly mortgage statement.

The Consumer Financial Protection Bureau (CFPB) directs consumers to the MERS Servicer Identification System (a private company that maintains information about mortgage servicers and loans) if they have any questions about which company is handling their home loan.

What changes if your mortgage servicing rights are sold to a new servicer?

The good news for homeowners is that not much changes when their servicing rights are sold to a new servicing company. Your loan amount, the interest rate you locked in if you got a fixed-rate loan, and generally your monthly payment due date remain the same.

“What will change is who the borrower makes their payment to and who they call for assistance,” said Stotts.

Different servicers may have different policies if you’re having trouble paying your mortgage, a natural disaster impacts your property, or you need to modify the home loan.

What to do if you can’t make your mortgage payments

If you find yourself in a period of financial hardship and are unable to make your payments, it’s important to notify your servicing company immediately.

“People should always contact their servicer as soon as they realize they have or are about to enter a period of financial hardship,” said Stotts.

The last thing most servicers want to do is foreclose on a home as it can cost the companies thousands of dollars.

“We will do everything possible to avoid a foreclosure,” said Stotts.