When you receive mortgage payments, the company managing the day-to-day tasks might not be the original servicer but a subservicer. This third-party company handles routine activities such as collecting monthly payments, managing escrow accounts for taxes and insurance, and providing customer support on behalf of the primary servicer. The primary servicer owns the servicing rights and ultimately manages the loan’s compliance and major decisions.
To visualize, imagine your mortgage servicer as a general contractor managing your loan, while the subservicer is a specialist subcontracted to perform specific tasks efficiently. Although payments and communications are directed to the subservicer, your original servicer holds ultimate responsibility.
Roles in Mortgage Servicing
- Lender/Originator: The bank or mortgage company that approved your loan and provided the funds.
- Servicer: The entity responsible for managing your loan payments and escrow, which may be the lender or a third party that bought servicing rights.
- Subservicer: A company hired by the servicer to perform daily loan management tasks, often employed to manage large volumes or specialized loans such as FHA or VA loans.
| Responsibility | Primary Servicer | Subservicer |
|---|---|---|
| Owns servicing rights | ✔️ | ❌ |
| Collects payments | Sometimes | ✔️ |
| Manages escrow | Sometimes | ✔️ |
| Customer service | Sometimes | ✔️ |
| Foreclosure decisions | ✔️ | ❌ |
| Legal responsibility | ✔️ | ❌ |
Why Use a Subservicer?
Subservicers allow mortgage servicers to operate more efficiently by outsourcing high-volume tasks. They often specialize in government-backed or defaulted loans and invest in technology that streamlines loan management.
What Borrowers Need to Know
When your loan is transferred to a subservicer, the Consumer Financial Protection Bureau requires your mortgage servicer to send a Notice of Servicing Transfer at least 15 days before the change. This notice provides the subservicer’s contact information and the effective date. Your loan terms remain unchanged; only the entity managing your loan changes.
You benefit from a 60-day grace period where you cannot be charged late fees for payments sent to the old servicer, who must forward them to the new subservicer.
Questions Borrowers Commonly Ask
- Who do I contact for loan issues? Start with the subservicer listed on your statements. If unresolved, escalate to the primary servicer.
- Can I refuse a servicing transfer? No, servicing transfers are permitted by your mortgage agreement.
- How do I update payments? Follow instructions in your Notice of Servicing Transfer and update any online payment setups.
For further information on mortgage servicing and related topics, see our articles on Mortgage Servicer Transfer and Escrow Account.
References
- Consumer Financial Protection Bureau, “What’s the difference between a mortgage lender, servicer, and the owner of the loan?“
- Investopedia, “Subservicer: Definition, How It Works, Example“
- Forbes, “What To Do If Your Mortgage Is Transferred To A New Servicer“
External Resource: For authoritative guidance, visit the Consumer Financial Protection Bureau’s page on servicing transfers.