Is There Any Difference Between a Bank and a Non-Bank Mortgage Servicer?

Yes, but most of the differences are in how the company is regulated and funded, not in your rights as a borrower. A bank or credit union servicer is examined by federal or state banking regulators and has deposits to draw on, while a non-bank servicer is licensed and examined by the financial regulator in each state where it does business and relies on borrowed money. The same federal servicing rules on payment crediting, statements, escrow, error resolution, and help for borrowers who fall behind apply to both. You usually cannot choose your servicer, so what you can do is check its license and complaint record and use the same rights either way.

What types of companies service mortgages?

Mortgage servicers fall into a few groups:

• Banks, savings associations, and credit unions that service loans they made or bought, or service loans for Fannie Mae, Freddie Mac, or other owners.
• Non-bank mortgage companies that do not take deposits. Many both make loans and service them, and some only service.
• Investors in servicing rights, such as mortgage real estate investment trusts, that hold the right to service loans as a financial asset and hire another company to do the work.
• Subservicers, which do the day-to-day work (payments, statements, escrow, phone calls) under contract for the company that holds the servicing rights. Both banks and non-banks act as subservicers.

Non-banks now handle most of the market. The Financial Stability Oversight Council (FSOC), a panel of federal financial regulators, reported that non-bank companies held the servicing rights on 54% of U.S. mortgage balances in 2022, up from 4% in 2008. For about half of the balances where a non-bank held the rights at the end of 2023, a separate subservicer did the daily work. If your loan was made by a bank, it can still end up with a non-bank servicer when the servicing rights are sold.

How are bank and non-bank servicers regulated and funded?

The funding difference matters most when many borrowers stop paying at once. When a borrower misses a payment, the servicer may have to advance the money to investors, tax offices, and insurers until the loan is brought current or resolved. FSOC found that non-bank servicers have less access to cheap, reliable cash for these advances, and that their lenders can cut or reprice credit lines during stress. In July 2021, state regulators adopted model financial standards for non-bank servicers; as of April 2024, nine states had adopted them in whole or in part, and state regulators estimated they reached the 50 largest non-bank servicers.

What stays the same for you?

Federal servicing rules apply based on the loan and the size of the servicer, not on whether it is a bank. With either type:

• A full regular payment (principal, interest, and any escrow due) must be credited as of the day it arrives, and you get a monthly periodic statement. A partial payment can be held until enough arrives to make a full one.
• Your escrow account follows the same limits and annual review.
• You can send a written notice of error or request for information to the address the servicer designates for them, and the servicer must respond within set deadlines.
• If you fall behind on your principal residence, the servicer must follow the same rules for reviewing you for loss mitigation (options such as a repayment plan or loan modification) and the same foreclosure timing rules.
• A servicing transfer comes with written notice, and for 60 days after the transfer date, a payment the old servicer receives by the due date (including any grace period) cannot be treated as late.

The main exception is size-based. A small servicer, one that services 5,000 or fewer mortgages, all of which it or an affiliate owns or originated, is exempt from the periodic statement rule and some delinquency procedures. That test can cover a community bank, a credit union, or a small non-bank lender that keeps its own loans. The federal laws that protect you from mortgage servicers are explained rule by rule on a separate page.

If a servicer fails, your loan terms do not change. FSOC notes that state regulators can require the servicing to be transferred, or Fannie Mae, Freddie Mac, or Ginnie Mae can move it, and the transfer notice rules still apply. What happens when the servicer changes covers what to check after a transfer.

How do you check a servicer's license and complaint record?

1. Look up a non-bank on NMLS Consumer Access. The Nationwide Multistate Licensing System (nmlsconsumeraccess.org) lists each licensed company. Search by NMLS number if you have it. Georgia's banking department, for example, tells consumers to look for the state under State Licenses/Registrations with "Yes" under Authorized to Conduct Business, and to check the Regulatory Actions section for final enforcement orders. Not every state records servicer licenses or registrations in NMLS, so if your state is missing, check your state financial regulator's own license lookup before drawing a conclusion.
2. Search the CFPB Consumer Complaint Database. Filter by company and the "Mortgage" product to see the issues borrowers reported and how the company responded. Large servicers draw more complaints because they have more customers, so compare the types of problems rather than the raw count. The database leaves out complaints the CFPB refers to other regulators, such as those about banks and credit unions with $10 billion or less in assets, so a small bank with few or no listed complaints may simply not be covered.
3. For a national bank, check the OCC. HelpWithMyBank.gov, run by the Office of the Comptroller of the Currency, takes complaints about national banks and federal savings associations.
4. Complain to the right agency if something goes wrong. The CFPB takes servicing complaints about both banks and non-banks, and your state financial regulator handles non-banks it licenses. Which government agency to complain to lists the options.

For satisfaction rankings by company, see which servicing companies are considered the best. For what a servicer does day to day, see what loan servicing is.