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Mortgage Servicers | What Do They Do and Why it’s Important

What you'll learn: The Role of a Mortgage Servicer

EXPECTED READ TIME: 6 MINUTES

Mortgage Servicers | What Do They Do and Why it’s Important

 

Did you know there’s a difference between a Mortgage Lender and a Mortgage Servicer? If you assume the organization that loaned you money will also process your payments and answer your questions along the way, you’re not alone. In reality, the mortgage world can be complex.

Some lenders do act as both a lender and servicer, working with members from pre-approval to payoff. However, in some instances, when the home loan closes, the servicing responsibilities may transfer from the Mortgage Lender to a Mortgage Servicer. In short, a Mortgage Lender handles all home purchasing transactions before you sign on the dotted line, while a Mortgage Servicer handles all day-to-day administration activity that occurs after you sign.

Read on to learn what a Mortgage Servicer does, why it matters, and how to find out who is servicing your mortgage.

What does a Mortgage Servicer do?

While there is an abundance of resources available on obtaining a home loan, information about what happens next is not always clear. The purpose of a Mortgage Servicer is to handle the ongoing home loan transactions, such as processing of your monthly payments, answering questions, and managing escrow account activity (taxes and insurance).

Processes Payments

Monthly home loan payments may consist of principal, interest, property taxes, insurance, and Homeowner’s Association (HOA) dues (PITIA). It’s a Mortgage Servicer’s job to ensure the monthly PITIA payments are applied accurately and timely. They will also maintain up-to-date information on your interest rate, and balance.

Manages Property Taxes & Insurance

Typically, a home loan is required to maintain an escrow account to ensure that property taxes and insurance premiums are paid. The Mortgage Servicer will debit the escrow account to pay those bills as they become due throughout the year.  

Home Loan Assistance

A Mortgage Servicer is your sole point of contact regarding questions about your existing home loan. They’ll also reach out to you if a payment is missed, or you need to know your options if something happens and you can no longer afford the payments. In the event a home loan becomes delinquent, the Mortgage Servicer’s goal is to find ways to avoid foreclosure, such as through a Forbearance Plan, a Repayment Plan, or Loan Modification.

How do I know who my Mortgage Servicer will be?

It’s not always easy to know ahead of time who will service your home loan. In accordance with the terms of the home loan, the servicing responsibilities can transfer one or more times during the life of the loan.

The servicing responsibilities are determined by the investor of your home loan. If your home loan is transferred, you will receive a communication with additional information, including contact information for the new Mortgage Servicer to make the transition as easy as possible. It is important to note that the terms of your home loan won’t change during a service transfer.

Why does Mortgage Servicing matter?

The process of obtaining a home loan can be lengthy; but is nothing compared to the years ahead spent repaying the home loan. This is why the ongoing relationship with your Mortgage Servicer matters more than ever, especially during a time of rising interest rates.

Whether you’re going through hard times, or simply have a question about a refund from an escrow account, the service you receive makes a difference. You want a Mortgage Servicer who communicates clearly, effectively, and is available to help.

 

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