Mortgage Lender Vs. Servicer: What’s The Difference?

Mortgage loan servicer vs. lender: Key differences

Most borrowers use the term “mortgage lender” to refer to the company they send their mortgage payment to each month. But oftentimes, the lender only handles creating and funding the loan. After that point, it’s common for them to hand over the loan to a mortgage servicer.

What is a mortgage lender, and what do they do?

A mortgage lender is a financial institution that provides loans to borrowers to buy, build or improve a home. They also offer mortgage refinancing services. A mortgage lender sets the loan terms (which include things like interest rates and repayment schedules). Common examples of mortgage lenders include banks, credit unions and online mortgage companies.

Mortgage lenders handle the origination and funding of mortgages. The origination process includes:

• Helping borrowers pick a home loan that’s right for them
• Taking the mortgage application
• Processing the loan
• Underwriting the loan
• Drawing up loan documents
• Funding the mortgage
• Funding the loan

After your mortgage closes, your lender might transfer the loan to a servicing company. The lender might mention this in your closing documents or inform you of the change after closing on the loan.

If you prefer to work with a lender that services its own loans, ask lenders upfront if they handle that task in-house or pass it off to another servicer. But if your lender doesn’t service its own loans, don’t panic. Many lenders don’t. If you set up automatic mortgage payments, you probably won’t interact with your servicer that much anyway.

What is a mortgage servicer, and what do they do?

A mortgage servicer is a lender or other mortgage servicing company that manages the day-to-day administrative tasks involved in overseeing a loan until the borrower pays it off.

The mortgage loan servicer essentially picks up where the mortgage lender leaves off. Once the lender transfers the loan, the servicer assumes responsibility for things like:

• Taking and processing payments
• Tracking loan balances and interest paid
• Generating tax forms
• Managing escrow accounts
• Overseeing loss mitigation programs
• Initiating foreclosure if the borrower defaults
• Processing requests to cancel mortgage insurance

Your mortgage loan servicer might also report your loan payments to the credit bureaus. If you ever suspect there’s been a mistake in how your mortgage payments are showing up on your credit report, contact your mortgage servicer and the credit bureau (not your original lender) to sort it out.

How to find your mortgage servicer

If you’re not sure who your mortgage loan servicer is, here are a few ways to figure it out:

• Check your most recent mortgage statement. Your mortgage servicer’s name and contact information should be listed on these statements.
• Contact your original mortgage lender. If your loan was transferred, your original mortgage lender should be able to tell you who they handed it off to.
• Use the Mortgage Electronic Registration System (MERS). If your loan is registered with MERS, you’ll be able to find it by searching on the MERS website with your property address or name and Social Security number, or by calling MERS toll-free at 888-679-6377.

What happens when my loan moves to a new servicer?

When your lender transfers your loan to a mortgage servicer — often to free up capital to lend more loans or to meet regulatory compliance — your mortgage terms do not change. You’re simply sending your payments to a new company, and you might also receive a new account number.

If you were unaware of this transfer at closing, don’t worry, you’ll get two letters indicating the change: a “goodbye” letter from your mortgage lender and a “hello” letter from the mortgage servicing company.

Typically, your current lender must send their letter at least 15 days before the effective date of the switch. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer then has 15 days after the effective date to send their welcome letter.

Sometimes, both parties (the lender and the new servicer) combine the notices into one letter. If that happens, you should still get it at least 15 days before the transfer occurs.

Both notices will contain:

• The name and address of the new servicer
• The date the mortgage lender will stop accepting your mortgage payments
• The date the new servicer will begin accepting your mortgage payments
• Telephone numbers for the old lender and new servicer
• A statement that the transfer does not change the terms of your mortgage
• A statement explaining your rights, and what to do if you have a question or complaint about the servicing of your loan

Can you change your mortgage loan servicer?

Unfortunately, you don’t get any say in the company that services your loan. If you want to avoid mortgage servicing companies, you can choose to deal only with self-servicing lenders when applying for a mortgage. If you encounter problems with your servicer, make a note of all your interactions and, if required, file a complaint with the Consumer Financial Protection Bureau (CFPB) online or by calling 855-411-2372.

If you already have a mortgage and aren’t happy with your mortgage servicer, you can refinance your loan with a different lender who services the loans they originate. Bear in mind, there’s no assurance they will manage loans for the long haul, even if they’re doing so currently. You also don’t want to refinance solely to get a new servicer — getting a new loan should bring other benefits too, like a lower interest rate.

Mortgage lender vs. mortgage servicer FAQ

• Can a mortgage lender and a mortgage servicer be the same entity?
  

  Yes, the same institution that funds your home loan (a mortgage lender) can also be responsible for managing it (a mortgage servicer).

• Who should I contact if I have issues or questions about my mortgage?
  

  If you simply need clarification regarding the details of your mortgage, contact your lender or servicer directly. If you’re facing financial hardship and need help with payments, contact your servicer as soon as possible to learn about options like forbearance. If you believe you’ve encountered housing discrimination, you can report it via the U.S. Department of Housing and Urban Development (HUD) website here, by phone at 800-669-9777 or by mail to a regional Fair Housing office.