Loan Servicing - Making Your Monthly Payments
After the loan closing, the lender designated to perform the loan servicing will notify the borrower(s) of the terms and conditions of the loan and indicate the mailing address for payments. Sometimes during the loan closing, the lender may inform the borrower that the servicing of the loan will be performed by another lender. Depending upon the lender, the mortgage may be sold to a secondary market investor while the servicing remains with the lender; this is typical of a mortgage banker. A mortgage banker collects the monthly payments from borrowers and remits the principal and interest to secondary market investors. The mortgage banker collects between .25% and .50% per annum of the unpaid loan balance for performing the loan servicing function. Other times the lender may keep the mortgage as an investment and also act as the servicing agent. This is typical of a large depository lender like a savings bank. In some cases, the lender that funds the mortgage may sell both the mortgage note and the loan servicing.
- Escrow Analysis: If the borrower makes monthly payments that include impounds for property taxes and hazard insurance, the loan servicing agent will analyze the escrow account periodically to assure adequate funds are available for payment. Generally, borrowers receive this analysis once a year. If there is a shortfall or surplus, the servicer will make adjustments to the monthly payment.
- Interest Payment Notification (1098): In January of each year, the loan servicer will notify borrowers of the total interest paid on the mortgage for the previous year.
- Loan Payoffs and/or Loan Assumptions: The loan servicer will provide information on loan payoffs and loan assumptions.
- Customer Service: The loan servicer is required to provide information to borrowers on their mortgage loans. Generally, the loan servicer has a toll free number that borrowers may call for information on such items as loan balances, interest paid, amortization schedules, escrow balances, etc.