Mortgage Servicing

A mortgage servicer is a company responsible for collecting the monthly mortgage payments, disbursing the taxes and insurance if necessary and crediting the balance to the borrower’s mortgage loan account.  The company that handles the mortgage servicing may engage in this activity for another mortgage lender or the company may be servicing the mortgage loan for their own portfolio of home loans.

The mortgage loan servicer receives a fee from each loan for the payment processing involved in servicing that loan.  The fee is usually a percentage of the payment on the loan.  Approximately ¼ of one percent is the standard fee for mortgage servicing.  But the service fees will depend on many factors including the mortgage loan type.  Fixed rate mortgages generally pay the smallest servicing fee followed by adjustable rate mortgages and then FHA loans and VA loans.  Generally, the more work to do as servicer such as collection calls and notices the greater the servicing fee. 

Often a home loan will have its servicing sold shortly after the mortgage loan closing.  A home loan may in fact, have its servicing rights sold multiple times over the life of the loan.  If your home loan is about to have its servicing sold or transferred to another company, the new servicing company must notify you within 15 days after the transferred occurred.  Within the notice, the new servicing company must notify you of:

The new mortgage servicer’s name and address.
The date that your old servicer will no longer be able to accept payments. 
The date this new servicer will begin accepting the monthly mortgage payments
A toll free phone number for the new servicer.
 If you have optional insurance coverages, the terms to continue must be spelled out.
A statement will be included that clarifies there is no changes to the terms and  
conditions of your original home loan and mortgage.

If your home loan has an escrow account, the servicer is required under the RESPA statute, to send an annual statement that illustrates the activity of the escrow account.  The statement will show the account balance for the escrowed funds and reflect the payments made for property taxes and insurance over the prior 12 months.

New mortgage loan servicers are not allowed to require an escrow of taxes and insurance if the terms of the original do not call for an escrow. 

After the servicing of a loan is transferred there is a 60 day grace period that bars the servicer from charging a late fee should the borrower inadvertently send their mortgage payment to the previous servicer or mortgage lender.

Usually the transition from mortgage loan servicing company to another goes smoothly, but errors do occur.  It is always a good idea to check to make sure that the existing mortgage lender is selling the loan or the servicing rights and when they received your last payment.  Then, check to see when the next monthly mortgage payment is due and to which address that payment should be sent.

Should you have a complaint regarding the servicing of your home loan, notify the servicer in writing of the complaint with as much supporting documentation as possible.  Under RESPA regulations, the servicer has 20 business days from the time they receive your complaint to acknowledge the dispute and 60 business to settle the dispute.  If you are not satisfied with the resolution and wish to file a complaint with Department of Housing and Urban Development, the contact location for such a complaint is:

 Department of Housing and Urban Development
 451 Seventh St.  SW Room 9154
 Washington, DC  20410