Mortgage Servicing Companies: A Comprehensive Guide

Mortgage servicing companies play a crucial role in the mortgage industry, handling everything from payment processing to customer service. They're responsible for ensuring that borrowers can communicate with their lender and resolve any issues that may arise.

One key function of mortgage servicing companies is to collect and process mortgage payments. This includes setting up payment plans, sending out statements, and even handling late payments. They work closely with lenders to ensure that payments are made on time and that borrowers are held accountable for any missed payments.

In the event of a borrower defaulting on their mortgage, mortgage servicing companies will typically initiate foreclosure proceedings. This involves sending out notifications to the borrower, scheduling auctions, and working with lawyers to complete the foreclosure process.

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Loan servicing companies play a crucial role in managing your mortgage payments. They handle the administrative tasks of your loan from the time the proceeds are dispersed to you until the loan is paid off.

Your mortgage servicer is responsible for collecting your monthly payments, paying taxes, and other aspects of the loan. They also maintain records of payments and balances, and follow up on any delinquencies.

Loan servicing can be carried out by the bank or financial institution that issued the loan, a third-party vendor, or a company that specializes in loan servicing. You may not get to choose your mortgage servicer, but they will be your primary point of contact for any questions or issues related to your loan.

A mortgage lender and a mortgage servicer are two different entities. The lender approves you for the loan and issues it, while the servicer handles the loan while you're paying it off. This means you won't get to pick your mortgage servicer, and they may change one or more times during the loan period.

Here are some key differences between mortgage lending and servicing:

Loan servicing has become an industry in itself, with companies compensated by receiving a small percentage of loan payments. This has made loan servicing less profitable for banks, but has created new opportunities for specialized companies to step in and take on this role.

Mortgage servicing companies are responsible for handling the administration of your mortgage, which includes making timely payments of principal and interest to maintain creditworthiness.

Traditionally, banks handled mortgage servicing, but the industry has shifted as loans were repackaged into securities and sold off a bank's books.

The servicing of loans has become a less profitable business line than the origination of new loans, leading to the separation of loan servicing from origination.

Mortgage servicing companies now play a crucial role in managing the loan life cycle, which is heavily reliant on technology and software to handle record-keeping and borrower expectations.

The industry's dependence on technology is a result of the changing habits and expectations of borrowers, who now demand more efficient and convenient services.

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You're looking for a mortgage servicing company to handle your loan payments, but where do you start? A loan servicing company can be a full-on company specializing in loan payment collection and acting as the intermediary between you and your borrowers.

To find the right servicer, you'll want to vet them thoroughly. This means asking the right questions to ensure they can handle your specific needs. Some loan servicing companies work with banks, private lenders, note investors, and investors like you who collect payments on their seller-financed properties.

You should ask potential servicers about their experience working with different types of lenders and loan instruments. For example, do they typically see seller financing in your state? Are they licensed to work in your state? This will help you determine if they're a good fit for your needs.

A good loan servicing company can handle late payment notifications and 1098 forms for the IRS. They can also offer automatic withdrawal from the borrower's account and automatic deposit to the lender's account. Some companies even split up payments to multiple lender accounts each month if needed.

Some questions to ask potential loan servicing companies include:

To operate as a mortgage servicer, you need to be licensed, but there's a catch: if you're a mortgage lender who originated, negotiated, and owns the loan, you're exempt from needing a separate license. This exception is outlined in Section 6111 (a)(b)(1)(ii).

A licensed mortgage servicer has the authority to service mortgage loans, which includes offering loan modifications. However, be aware that loan modifications don't include agreements to refinance a mortgage loan into a new one.

Each licensed location, including branches, must have a Qualifying Individual/Branch Manager who meets three specific requirements. Here's a breakdown of what that entails:

You can access the MERS database to find your mortgage servicer online. Simply call (888) 679-6377 or visit the MERS website.

The MERS database tracks most mortgages in the U.S., making it a valuable resource for homeowners. You can use it to look up your mortgage servicer with just the home's address.

To get started, head to the MERS website or give them a call at (888) 679-6377.

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A licensed mortgage servicer in Pennsylvania needs to have a Qualifying Individual/Branch Manager at each location. This person must be a mortgage originator or meet the licensing requirements of a mortgage originator.

A Qualifying Individual/Branch Manager is a management-level officer assigned to the licensed location. They must live within 100 miles of the licensed location.

Here are the specific requirements for a Qualifying Individual/Branch Manager:

Congressional hearings were held to examine problems emerging in the mortgage servicing industry. In 2010, the United States House of Representatives subcommittee on housing issues, led by Congresswoman Maxine Waters, held a hearing on November 18 to investigate the widespread issues.

The hearing was a response to the widespread and popularized problems regarding foreclosure fraud in the media. This event highlighted the need for closer examination of the mortgage servicing industry.

The hearing marked a significant step towards addressing the issues in the industry.

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You can make the loan servicer's job easier by reducing friction in the payment process, making it effortless for the borrower to send in their payment each month.

One way to do this is to provide the borrower with easy access to their loan information, such as their loan balance, payment due date, and payment address.

This information should be readily available online, so the borrower doesn't have to waste time calling you with basic questions.

A loan servicing company can also collect payments from borrowers in a multitude of ways, including automatic withdrawal from the borrower's account and automatic deposit to the lender's account.

They can even split up payments to multiple lender accounts each month if needed.

Here are some common payment collection methods:

A loan servicing company can also handle late payment notifications and 1098 forms for the IRS, taking a load off your shoulders.

Three companies controlled 93% of government-owned student loans worth $950 billion, affecting about 30 million borrowers as of 2018.

The mortgage meltdown in 2007-2008 led to increased scrutiny on securitization and loan servicing, resulting in higher costs for loan servicing.

Smaller, regional banks, and non-bank servicers are moving into the loan servicing space as big banks slowly back away due to growing regulatory concerns.

The cost of loan servicing has increased since the 2007-2008 financial crisis, and there's always a potential for more regulation.

Some loan servicers are using technology to reduce compliance costs, but there's also a trend of banks refocusing on servicing their own loan portfolio to keep a connection with retail clients.

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In July 2009, the mortgage servicing industry received criticism for many servicers' apparent unwillingness to modify adjustable rate mortgages held by homeowners on the verge of foreclosure in the United States.

The main reason behind the slow and difficult process of modifying a mortgage was the lucrative fees which mortgage servicers charge to delinquent homeowners.

President Barack Obama's Administration put pressure on mortgage servicers to permanently modify thousands of loans to make them more affordable and prevent foreclosures.

Industry insiders and legal experts cited the lucrative fees as the conflict of interest that led servicers to stop or slow the modification process in many cases.

The Administration's efforts to address the foreclosure crisis were hindered by the mortgage servicers' reluctance to modify mortgages.

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Mortgage servicing mistakes aren't limited to the US. Over 18,000 British homeowners with Yorkshire Bank and Clydesdale Bank found their monthly variable interest rates were miscalculated by a software error in 2010.

These errors led to increased payments of several hundred pounds a year for the homeowners. The corrected amortization schedule resulted in higher monthly payments.

In Ireland, 436 mortgage holders with Allied Irish Bank were overcharged by an average of €900 in 2009. The bank claimed the error happened when customers were charged an interest rate that didn't match the loan-to-value ratio on their account.

An Australian businessman won a judgement against National Australia Bank in 2010, after the bank incorrectly charged excess interest on related mortgages. The interest rate was supposed to be fixed at 5.65%, but the bank charged 5.85% on one occasion.

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