What Is Loan Servicing?

Loan servicing is the day-to-day management of your mortgage from closing until it is paid off: collecting your monthly payment, applying it to principal and interest, paying your property taxes and homeowners insurance if your loan has an escrow account, sending statements, answering questions, and working with you if you fall behind. The company that does this work is your servicer. It may be the lender that made your loan, but it often is not, and the servicer can change during the life of the loan. Federal rules set deadlines and limits for servicers, whoever owns your loan.

What does a mortgage servicer do?

The Consumer Financial Protection Bureau (CFPB) lists the servicer's work as processing payments, answering questions, tracking principal and interest paid, managing escrow, offering options to borrowers who fall behind, and, in certain circumstances, starting foreclosure. Broken into tasks:

• Billing and payments. Sending a monthly statement, accepting payments, and crediting each payment to your account.
• Passing money along. Forwarding principal and interest to whoever owns the loan.
• Escrow. If your loan has an escrow account (a holding account for taxes and insurance funded through your monthly payment), paying those bills from it, reviewing it each year, and adjusting your payment when costs change. Without escrow, you pay your tax and insurance bills yourself.
• Records and customer service. Tracking your balance and payment history, answering written questions, and fixing errors.
• Delinquency. Contacting you if a payment is missed and reviewing you for options such as a repayment plan or loan modification (together called loss mitigation).
• Payoff. Giving you an accurate payoff amount when you sell, refinance, or pay the loan off early.

Who are the parties in loan servicing?

Four roles can be involved in one mortgage, and one company can fill more than one of them:

Many lenders sell the loan soon after closing, often to Fannie Mae, Freddie Mac, or into a pool of mortgage-backed securities, and either keep the servicing or sell it. The Financial Stability Oversight Council (FSOC), a panel of federal financial regulators, reported that for the mortgage balances where a non-bank company held the servicing rights at the end of 2023, a separate subservicer did the day-to-day work on about half, up from about a quarter in 2015. That is why the company name on your statement can differ from both your lender and the owner of your loan. For a fuller comparison of these roles and who decides what, see the difference between a servicer and a mortgage holder.

What happens to your loan after closing?

A typical sequence:

1. Your first statement arrives. It comes from the servicer, which may already be a company other than your lender. Each periodic statement shows the amount due, the due date, the late fee and when it applies, how your last payment was split, and a toll-free number.
2. The loan may be sold. The new owner must send you a notice within 30 days of the transfer with its name and contact information. A sale does not change your interest rate, payment, or other terms.
3. Servicing may be transferred. Your old servicer generally must notify you at least 15 days before the transfer and the new servicer within 15 days after it, or both can send one notice at least 15 days before. For 60 days after the transfer, an on-time payment sent to the old servicer cannot be treated as late. What happens when a mortgage is sold or the servicer changes covers the notices and what to check.
4. Escrow, if you have it, is reviewed each year. The servicer analyzes the account, sends you an annual statement, and resets your payment. It may keep a cushion of no more than one-sixth of the year's expected tax and insurance bills, and if you are current it must refund a surplus of $50 or more within 30 days of the analysis. See how an escrow account works for what it pays and why the payment changes.
5. You pay off the loan. When you sell, refinance, or make the last payment, the servicer provides the payoff figure, and servicing ends once the balance is paid.

How do you find out who your servicer is?

Check your most recent monthly statement or coupon book; the servicer's name, address, and phone number are on it. If you cannot find either, the CFPB points to the MERS Servicer Identification System, a free lookup run by the private company that registers many mortgages, at mers-servicerid.org or (888) 679-6377.

To learn who owns the loan, ask the servicer. If you send that request in writing to the address the servicer designates for information requests, it must give you the owner's name and contact information within 10 business days and cannot charge you for it. Fannie Mae and Freddie Mac lookup tools and the other ways to check are covered under how a servicer differs from a mortgage holder.

What rights do you have with your servicer?

Two federal laws carry most of the rules: the Real Estate Settlement Procedures Act (RESPA), implemented by the CFPB's Regulation X, and the Truth in Lending Act (TILA), implemented by Regulation Z. The main rights, with the page that covers each one:

Some of these rules do not apply to every servicer. A small servicer, one that services 5,000 or fewer mortgages, all of which it or an affiliate owns or originated, does not have to send periodic statements and is exempt from parts of the delinquency procedures. Even a small servicer generally cannot make the first foreclosure filing until you are more than 120 days behind. Most of the delinquency protections also apply only to a loan on your principal residence.

What should you do if your servicer makes a mistake?

1. Call first and take notes. Use the number on your statement and write down the date, the name of the person you spoke with, and what they said.
2. Put it in writing. Send a written notice of error, such as a payment that was not credited, a fee charged without a reasonable basis, or an escrow bill not paid, to the specific address the servicer lists for errors. Include your name, loan number, and what you believe is wrong. Keep a copy and proof of mailing.
3. Watch the deadlines. The servicer must acknowledge your notice within 5 business days and correct the error or explain why it found none, generally within 30 business days. It can extend once by 15 business days if it tells you in writing. It cannot charge a fee or make payment of the disputed amount a condition of responding. Sending a notice does not pause your loan, so keep making your regular monthly payments while the dispute is open.
4. Escalate if needed. If the response does not resolve the problem, you can file a complaint with the CFPB or your state's financial regulator.

When you write, ask for copies of the documents the servicer relied on. A written request for information gets its own response deadline, separate from your notice of error.