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Mortgage Lender vs. Loan Servicer: What’s the Difference?

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Once you get a mortgage and begin repaying it, you may not always make payments to the mortgage lender that provided your loan. In some cases, loan servicing companies work directly with borrowers to manage their loan repayment and related issues that may come up throughout the life of the loan.

While a mortgage lender is the financial institution that lends you money to buy a home, a loan servicer is the company you make payments to after the loan has closed. Your original lender may also be your loan servicer but, oftentimes, mortgages are sold to other companies after closing.

What is a mortgage lender?

A mortgage lender is the bank, credit union or other financial institution you borrow money from to buy a home. They review your credit, income, assets and other pertinent information to determine whether you can qualify for a loan.

Lenders also handle the processing and underwriting of your mortgage before providing the funds at the closing table.

What is a mortgage servicer?

A mortgage servicer is a company that manages your loan after it’s closed. A servicer’s responsibilities typically include:

  • Sending monthly mortgage statements.
  • Monitoring and processing payments.
  • Managing your escrow account, if applicable.
  • Responding to concerns and questions about your loan.

Your mortgage lender and servicer might be two different companies, especially if your loan is sold.

What happens if my mortgage lender transfers my servicer?

To maintain their capacity to lend money, mortgage lenders often sell their loans after originating them.

If your mortgage changes loan servicing companies, you’ll receive notices from both your existing servicer and the new one. Your current servicer must notify you no later than 15 days before the transfer date, and your new servicer should give you notice within 15 days after the transfer date, according to the Consumer Financial Protection Bureau (CFPB). Both notices must include:

  • The effective date of the transfer, which is likely the due date for your first payment with the new servicer.
  • The names, addresses and phone numbers of the current servicer and the new servicer.
  • The date your current mortgage servicer will stop accepting mortgage payments.
  • The date your new mortgage servicer will begin accepting mortgage payments.
  • Whether the transfer affects any optional coverage you have, such as mortgage protection insurance, and what you need to do to keep your coverage.
  • A statement explaining the transfer won’t affect any of your loan terms, except those directly related to loan servicing.

You’re also entitled to a 60-day grace period, during which your new servicer can’t charge you a late fee if you mistakenly send your mortgage payment to your old servicer. The grace period starts on the effective transfer date.

Note about escrow accounts

If your new servicer makes changes to your escrow account that affect the monthly amount owed, they must send you an initial escrow account statement within 60 days of the transfer date. If they don’t make changes to your escrow account, they can continue to use the same calculations and annual analysis date as your previous servicer, or choose their own.

Can I change my mortgage loan servicer?

The short answer: No. Your mortgage lender has the right to transfer your loan servicing to another company, and that’s simply out of your control.

It may seem unfair that you can’t choose who handles your mortgage loan servicing, especially because you chose your lender. But lenders need the ability to transfer servicing rights in order for them to underwrite and fund new loans.

If you’re having an issue with your loan servicer, such as an account error or escrow shortage, take the following steps to get it resolved:

  1. Write and send a letter to your mortgage servicer. Explain the error to your servicer in writing. Include your name, contact information and account number. The CFPB has an online letter template. For a more immediate response, you can call your servicer instead. You can find their contact info on your monthly mortgage statement, or by checking the Mortgage Electronic Registration Systems website.
  2. Wait for a response from your servicer. Within five days of receiving your letter, your servicer must let you know in writing that it was received. They must also respond within 30 days of receiving your letter detailing next steps on how to resolve your issue.
  3. Escalate the issue. If corresponding with your servicer doesn’t resolve your issue, consider filing a complaint online with a government agency, such as the Office of the Comptroller of the Currency or the CFPB. Both agencies are responsible for regulating financial institutions, including mortgage lenders, and may help resolve your issue.
 

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