It seems that they are so similar, but at the same time, they are so different. Mortgage servicer vs lender – how do they work, and what is the main difference? Discover more in this article.
Loan servicer vs lender. Terminology
- A mortgage lender is a financial institution that provides loans for buying a property.
- A mortgage service is a financial institution that manages home loans while borrowers pay them off.
Some companies act in two roles at once. Above all, we’re curious about the actions of the homeowner. They frequently receive a mortgage loan from one lender and then move it to another service provider.
How does the mortgage service work?
Banks, credit unions, and other financial institutions can provide mortgage services to their customers by servicing their loans. Large service companies manage about ¾ of all loans in the US. They primarily service loans owned by Fannie Mae and Freddie Mac.
Loan servicer vs lender. Main difference
Let’s start simple — why do you even need to understand the difference? Clarity is crucial when you’re instructed to make mortgage payments to a different entity. For example, this situation may occur after the closing of a mortgage loan or during its payment.
Suppose your mortgage is being transferred from a lender to a mortgage servicer or from one servicer to another. In that case, you should receive several notices from the company you are sending money to and the company you will soon start paying.
The order of payment and all the details must be indicated in the message, so do not worry in advance. It’s essential to keep in mind that if you have automatic payments set up, you’ll need to update your bank account’s payment information.
What to do if your loan is transferred?
Even if your loan has been transferred, its terms will not change. But now, you will have to check your statements more carefully — to ensure no errors were made.
What is important to pay attention to:
- Your latest payments have been applied correctly
- Correctness of your main and deposit balance
All payments from your escrow account have been made
What should I do if I mistakenly send a payment to an outdated service provider?
It’s okay; the main thing is not to panic. You will no longer be penalized with late fees during the 60-day grace period.
Why do you need mortgage services?
The main task of mortgage services is to collect your payments and correctly allocate them to principal, interest, and escrow.
Mortgage lending, in contrast, consists of working with potential borrowers, underwriting, providing loan funds, and other stages that make up the purchase of a house.
Let’s take a closer look at what mortgage services do:
- Manage and track borrower payments
- Escrow account management
- Notification of a change in the credit rate
- Responding to requests from borrowers for account information or errors
- Help for borrowers who are trying to avoid foreclosure or are struggling with payments
- Additional tasks for maintaining your mortgage — for example, do you have the necessary insurance
How to find out who your mortgage servicer is?
For starters, look at your monthly report. The company that sent it to you is your servicer.
Also, you may not have access to mortgage loan statements. Then, you can refer to the Mortgage Electronic Registration Service (MERS) — enter your name and address here to find out who your servicer is.
Can I change my loan provider?
Unfortunately, it won’t be possible to switch your mortgage provider. But if you’re buying a mortgage and want to know who your provider will be, you may have a say because some lenders service the loans they make. However, the lender cannot guarantee that there is no chance they will ever transfer your loan.
If you need help with the service organization, we advise you to report the issue to the Consumer Financial Protection Bureau or the Office of the Comptroller of the Currency.
Loan servicer vs lender. Conclusion
The mortgage lender gives loans, not housing. A loan service is a financial institution that facilitates home loans and manages them while borrowers make payments. Faced with any questions on mortgage lending, it is better to ask professionals immediately. That’s the reason to sign up for a consultation at LBC Mortgage!