Loan Servicing
Loan servicing encompasses the administrative functions performed after a mortgage closes, including collecting monthly payments, managing escrow accounts, processing payoff requests, and handling borrower communications on behalf of the loan owner or investor.
What This Means
What a Servicer Does
The mortgage servicer is the company that manages the day-to-day administration of a mortgage loan. Core responsibilities include collecting and processing monthly principal and interest payments, managing the escrow account for property taxes and insurance, sending annual statements and tax documents (Form 1098), responding to borrower inquiries, and reporting payment history to credit bureaus. The servicer may or may not be the same entity that originated the loan.
Servicing Transfers
Mortgage servicing rights (MSRs) are frequently bought and sold between financial institutions. When a servicing transfer occurs, the current servicer must notify the borrower at least before the transfer, and the new servicer must send a welcome notice within after the transfer takes effect. During the transfer period, a borrower cannot be charged a late fee if they mistakenly send payment to the old servicer. RESPA governs servicing transfer requirements and borrower protections.
Escrow Management and Disputes
Servicers perform an annual escrow analysis to ensure the account collects enough to cover property taxes and insurance premiums. If there is a shortage, the servicer may increase the monthly escrow payment or allow the borrower to pay the shortage as a lump sum. Federal regulations limit escrow cushions to no more than of the total annual escrow disbursements. Borrowers who believe their servicer has made errors can submit a qualified written request (QWR), and the servicer must acknowledge receipt within and resolve the issue within .