After you close on a home, your loan is often transferred from the original lender to a new company for day-to-day management. This is a standard industry practice, and the company that takes over is known as your mortgage servicer.
Think of your lender as the company that approves and funds the loan, while the servicer is the company that manages it long-term. Your original lender may also be your servicer, but it’s common for them to sell the servicing rights to a specialized third-party company.
Lender vs. Servicer: What’s the Difference?
While the terms are sometimes used interchangeably, the lender and servicer have distinct roles.
- A Mortgage Lender (or originator) is the financial institution that provides the funds for your home purchase. Their work is focused on the beginning of the loan’s lifecycle, including application, underwriting, and closing.
- A Mortgage Servicer handles the loan’s daily operations after it has been funded.
When a lender sells servicing rights, it is purely an administrative transfer. This transaction does not alter the terms of your mortgage—your interest rate, loan balance, and principal and interest payment remain unchanged. The only difference is who you contact and where you send your payments.
Key Responsibilities of a Mortgage Servicer
Your mortgage servicer is your primary point of contact for all matters related to your loan. Their duties include:
- Collecting Payments: Processing your monthly mortgage payments and correctly applying the funds to principal, interest, and escrow.
- Managing Your Escrow Account: If your loan includes an escrow account, the servicer uses those funds to pay your property taxes and homeowners insurance premiums on your behalf. They also perform an annual escrow analysis to ensure the correct amount is being collected.
- Providing Statements and Tax Forms: Sending monthly statements that detail your payment breakdown and remaining balance. They also issue IRS Form 1098 each year, which reports the total interest you paid and can be used for the mortgage interest deduction.
- Handling Delinquency and Foreclosure: If you face financial hardship and struggle to make payments, the servicer will manage loss mitigation options like forbearance or a payment modification. They are also responsible for overseeing the foreclosure process in cases of default.
What Happens When Your Mortgage Is Transferred?
Receiving a notice that your mortgage is being transferred to a new servicer can be concerning, but federal law provides key protections. According to the Consumer Financial Protection Bureau (CFPB), you must receive two separate notices:
- A letter from your current servicer at least 15 days before the transfer.
- A welcome letter from your new servicer within 15 days after the transfer.
Crucially, there is a 60-day grace period following the transfer. During this time, you cannot be charged a late fee if you accidentally send your payment to the old servicer.
How to Resolve Issues with Your Servicer
If you encounter an error, such as a miscalculation of your escrow payment or an incorrect fee, follow these steps:
- Contact Customer Service: Call your servicer’s main support line with your loan number and any relevant documents ready.
- Submit a Written Request: If phone calls are unsuccessful, send a formal “notice of error” or “request for information” letter. Servicers have a legal obligation to acknowledge and respond to these inquiries.
- File a Complaint: If the issue remains unresolved, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). The CFPB will forward your complaint to the company and work to get a response.