What is a mortgage servicer and what are the mortgage servicer’s obligations to the borrower?
Jason just settled on his first home. During the closing Jason received a document that discussed mortgage servicing. In essence, the document indicated that Jason’s lender transferred 99.9% of the loans it originated in the last year to another entity. And, just yesterday, Jason received a notice from his lender of its intention to sell his loan. What does all of this mean?
A mortgage servicer is responsible for collecting monthly payments due on the mortgage loan. In addition, a mortgage servicer is responsible for maintaining the borrower’s escrow account (if any) and for making the requisite distributions therefrom.
In addition, a mortgage servicer must send an annual statement of account to the borrower. The annual statement of account must detail how the borrower’s monthly mortgage payments were applied to principal, interest, taxes and insurance. The annual statement of account must also provide the borrower with notice of any adjustments to the monthly payment necessary to cover taxes and insurance in the coming year.
What can I expect in the event of a transfer of servicing?
A borrower is entitled to notice of the transfer before the transfer takes place. Usually, the borrower will receive notice from the original mortgage servicer and from the new mortgage servicer. The notice(s) must indicate the date of the transfer and the contact information for the new mortgage servicer. The new mortgage servicer is bound by the terms of the borrower’s original loan agreement; thus, the terms of the borrower’s original loan will not change as a result of the transfer. In the event there is any change with regard to the borrower’s homeowner’s insurance, the borrower must be notified. Furthermore, the borrower is entitled to a 60-day grace period following the transfer. During the grace period, the borrower cannot be charged a late fee for mistakenly sending the mortgage payment to the original mortgage servicer.
Following any transfer of mortgage servicing, a borrower should carefully examine all mortgage statements to make sure that the taxes and insurance on the property have been paid on time and also to make sure that all payments made by the borrower have been credited to the borrower’s account.
For more information on mortgage servicing, contact:
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410