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Mortgage Servicing Explained

Mortgage Education Lesson #6

Sometimes the bank you get your loan from is not the company who’ll service it. Find out what mortgage servicing is and how it affects your home financing.

  • What is mortgage servicing?
  • What does it mean for my loan?
  • Who do I make payments to or contact if I have questions?

What is Mortgage Servicing?

A common homeowner misconception is that the company who granted your mortgage loan is the company who will own the loan until you either pay it off or sell your home. The more likely scenario is that your mortgage loan (along with the servicing) will be sold to another, usually larger, company.

Servicing a mortgage entails collecting and crediting payments to your loan; paying property tax and homeowner insurance if you have an escrow account; informing you of when property taxes rise and fall; charging penalties if your payments are late; and providing customer service for any questions you have about your loan after it has closed.

What does it mean for me if my loan is sold?

If your mortgage loan is sold to another company, you may be required to make your payments to the new servicer or you may continue to send payments and receive servicing from your loan originator (the company you currently pay). Either way, you will be notified of all changes in writing at least 15 days before the effective date of the transfer occurs. The ‘effective date’ is the date that your payment is due to the new lender.

The Federal Trade Commission (FTC) is the country’s consumer protection agency and, in cases such as this, dictates regulations to mortgage lenders that help ensure the rights of homeowners like you. Whenever you encounter an issue or change that you have a question about, continue to make your payments on time and be sure to put your correspondence in writing so that you have a copy of that correspondence with the companies. This will help protect you if any future problems arise.

What if there’s a new term or fee?

In you find a fee or different term in any of this correspondence that you don’t understand or want clarification on, contact your new servicer in a written inquiry. By law, they are required to respond with a written acknowledgement of your inquiry within 20 business days. The company then has 60 days to address your concerns and make sure everything in the account is correct, and if not, amend it. The company will then contact you in writing with any changes made and why they were made.*

Who do I contact with my questions?

As per the law, you’ll be informed of all changes made to your mortgage servicing, so you should have all the information needed as to whether you should direct questions to the new provider or the loan originating company.

In some cases, like at eLEND, even if your loan is sold, your mortgage servicing is still done through your original provider. Your payments will still be due to the original company, that company will manage your escrow account if you have one, and you will direct your questions to that company. If you have an escrow account, the company in charge of your servicing will be responsible for paying property taxes, hazard insurance, etc. on time or they risk incurring a penalty themselves.*

More Resources

  • Speak with one of our mortgage professionals to discuss your eligibility for loan programs at 1-800-634-8616.