Loan Servicing
After closing on your mortgage, your loan enters servicingâa process where your servicer handles daily management of your loan. Understanding how loan servicing works helps you know who to contact for issues, understand your statements, and know your rights if problems arise.
What Does a Loan Servicer Do?
A loan servicer collects monthly payments, manages escrow accounts, tracks loan balances, and handles customer service for your mortgage. Your servicer is the primary contact for payment questions, address changes, and account management. They process payments, send statements, and handle payoff requests when you refinance or sell.
Servicers also handle escrow accounts, paying property taxes and insurance on your behalf from funds you've deposited. They track insurance coverage and ensure taxes are paid to avoid penalties. If you fall behind, your servicer works with you on repayment options or loss mitigation alternatives to foreclosure.
Servicing Transfers
Your servicer can change during your loan term. Loans are frequently sold and servicing transferred to other companies. When this happens, you'll receive notice with information about the new servicer. Payments must go to the new servicer once the transfer is complete. Keep records of payments to both old and new servicers during the transition.
Servicing transfers can be confusing, but your rights are protected. The new servicer must honor all terms of your original loan. If you were making payments to the old servicer, continue until you receive confirmation of the transfer. Request a payoff statement from the new servicer if needed.
Escrow Account Management
Most mortgages include escrow accounts that cover property taxes and insurance. Your servicer collects a portion of these costs with each payment and pays bills when due. Escrow analyses are conducted annually to determine if your monthly amount needs adjustment based on actual tax and insurance costs.
Keep track of your escrow account through statements. If taxes or insurance increase, your monthly payment will increase. You can request an escrow analysis anytime if you notice discrepancies. Some homeowners prefer to pay taxes and insurance directly to have more control, though this requires discipline to ensure timely payment.
Handling Servicer Problems
If your servicer makes errors, contact them immediately to resolve the issue. Document all communications, including names, dates, and what was discussed. If phone calls don't resolve the problem, write a formal letter explaining the issue and include copies of relevant documents. Keep copies of everything you send.
If problems persist, you have options. You can file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state's banking regulator. The CFPB can help resolve servicing issues and holds servicers accountable. Many problems can be resolved with proper documentation and persistence.
When to Contact Your Servicer
Contact your servicer for any payment issues, address changes, or account questions. If you experience financial hardship, contact them immediately to discuss options. Many servicers offer forbearance, repayment plans, or loan modifications for those facing difficulty. The earlier you contact them, the more options you may have.
Also contact your servicer if you notice errors on statements, have questions about escrow, or receive notice of servicing transfer. Don't ignore problemsâthey rarely resolve themselves. Your servicer has resources to help if you communicate proactively.