Perhaps one of the most confusing aspects of getting a mortgage is knowing who you actually pay once the thing funds. And to that end, when your first mortgage payment is due.
While Bank X may have closed your loan, an entirely different company could send you paperwork and a payment booklet. What gives?
Well, this highlights the difference between a mortgage lender and a mortgage servicer.
Mortgage Lender vs. Mortgage Servicer
- The bank or mortgage lender processes and funds the home loan
- Once it closes it may be sold off to a loan servicer or retained in portfolio
- The job of a loan servicer is to collect monthly mortgage payments
- And manage escrow accounts if your home loan has impounds
As noted, a mortgage loan servicer, also known simply as a loan servicer, is the company that collects your monthly mortgage payments.
They also manage your escrow account if your home loan has impounds, collecting a portion of property taxes and homeowners insurance each month, before making those payments on your behalf when due.
So really, there’s a good chance you’ll deal with your loan servicer a lot more than your mortgage lender, who may have only been in the picture for a month or so while your loan was originated.
You see, many mortgage lenders focus on loan origination as opposed to servicing, so they’re happy to fund your loan and quickly sell it off for a profit, then rinse and repeat.
The same goes for mortgage brokers, who fund your loan on behalf of a wholesale mortgage lender, which also may sell off the loan to a different servicing company shortly after it closes.
Further complicating all this is the fact that your mortgage lender could also be your loan servicer because some big banks and mortgage companies can profit from it.
One thing mortgage companies figured out in recent years was that keeping in touch with their past customers was a great way to generate repeat business.
But if they sell all their home loans off to other companies, they may lose out if mortgage rates fall and these customers are ripe for a mortgage refinance.
There are also mortgage subservicers, companies that perform loan servicing tasks on behalf of a lender, instead of completing those things in-house.
Anyway, without getting too convoluted here, it’s important to note this distinction between lender and servicer so you know who you’re dealing with.
And to ensure you’re sending monthly mortgage payments to the right place!
What Do Loan Servicers Do?
- Collect monthly mortgage payments
- Manage escrow accounts (property taxes and homeowners insurance)
- Provide customer service if borrowers have any questions
- Generate loan payoff statements
- Perform loss mitigation (loan default, loan modifications, foreclosure, credit reporting)
- Ensure compliance with federal, state, local regulations
The list above should give you a better idea of what loan servicers do, and why banks and lenders may choose to outsource these things.
If you have any questions regarding your home loan post-closing, it’s generally best to get in touch with your loan servicer as opposed to your mortgage broker or lender.
They should be able to answer any questions you have, whether it’s knowing where to send payments, how to make extra payments or biweekly mortgage payments, loan amortization questions, and so on.
Additionally, if having payment troubles in the future, your loan servicer should be the one to call to discuss options.
Remember, the lender is typically just there to help process and close your loan, then hands off the reins to a servicer from there.
Mortgage Servicing Transfers
- Many home loans are transferred to loan servicing companies shortly after funding
- You should receive a letter within 15 days of your loan being transferred
- The new company’s contact information should be prominently displayed
- It will also include the date when the old servicer will no longer accept payments
- And the date when the new servicer will start accepting monthly payments
One of the most important things to do after your mortgage closes is to take note of who your loan servicer is.
Unfortunately, mortgage servicing rights are frequently transferred shortly after your loan funds, which can make it confusing to know who to pay.
Add in all the junk mail you might receive as a new homeowner (like mortgage protection insurance) and it could get really murky.
The good news is lenders and loan servicers must adhere to certain rules regarding the transfer of servicing rights.
After your mortgage funds, look out for a letter in the mail from the entity that closed your loan regarding a servicing transfer. You may also receive a letter from your new loan servicer as well.
It should clearly explain who will be processing your mortgage payments going forward, and is required to be sent 15 days prior to your loan’s servicing rights being transferred to the new servicer.
The letter should include all the relevant contact information you’ll need to ensure payments are sent to the right company at the right time.
Take note of when they’ll begin accepting payments, and when the old company will stop accepting payments.
In my opinion, it doesn’t hurt just to call the company and make sure everyone is on the same page before you send your payment, just to avoid a mess.
If you do make a payment mistake, there are some protections in place if it’s within 60 days of the servicing transfer, per the CFPB.
During this time, the new loan servicer can’t charge you a late fee or mark the payment as late if your payment was sent to your old servicer by its due date or within the grace period.
Who Are the Top Mortgage Servicers in the Country?
1. Quicken Loans
2. Regions Mortgage
3. Huntington National Bank
4. TD Bank
6. M&T Mortgage
7. SunTrust Mortgage (Truist)
8. Bank of America
9. Guild Mortgage
10. Citizens Mortgage
Quicken Loans was the highest-ranked mortgage servicer for the seventh consecutive year in 2020, per the latest U.S. Primary Mortgage Servicer Satisfaction Study from J.D. Power.
Both USAA and Navy Federal actually have higher rankings than all the companies listed above, but don’t meet the survey’s award criteria.
In other words, you should have a very good customer experience with those two companies as well.
Who Are the Largest Mortgage Servicers in the Country?
These are listed in alphabetical order since I don’t have figures available to rank them by total servicing volume. But they are some of the largest mortgage servicers in the country.
- Bank of America
- Flagstar Bank
- Freedom Mortgage
- Guild Mortgage
- Lakeview Loan Servicing
- Mr. Cooper
- Ocwen Financial
- Quicken Loans
- U.S. Bancorp
- Wells Fargo
All of these companies service billions of dollars in home loans for customers, which they either originated themselves or acquired from other banks and mortgage lenders.
If you have a mortgage, there’s a good chance one of the companies on this list handles your loan servicing.
Tip: Always take the time to make sure you’re actually dealing with your loan servicer and not some phony entity.