Loan servicing is the administrative management of your mortgage after the loan closes. The loan servicer is the company responsible for collecting your monthly payments, managing your escrow account, sending statements, and providing customer support throughout the life of your loan.
A servicing transfer occurs when the lender responsible for managing your mortgage changes from one company to another. This is very common after a loan has closed but may also happen multiple times throughout the life of the loan. While the company managing the loan changes, the loan itself does not.
Your key loan terms remain exactly the same, including:
- Interest rate
- Loan term
- Principal and interest rate
- Amortization schedule
These terms are legally set in the Promissory Note and the Deed of Trust, and they cannot/will not change because of a servicing transfer. This is a normal part of the post-closing process and is commonplace for a large majority of newly originated mortgage loans.
Lenders and investors routinely buy and sell the rights to service mortgages as a business transaction. It’s extremely common in the mortgage industry and has nothing to do with your creditworthiness or any problem with your loan.
It is helpful to understand the difference between originating a loan and servicing a loan. The originating lender handles the application, underwriting, approval, and funding of the mortgage.
The servicer manages the loan after closing by collecting payments, managing the escrow account, and providing any customer support needed during the life of the loan.
Many transfers occur within the first year. For homeowners, the main adjustment is simply setting up a new online account and updating any automatic payments with the new servicer. Federal regulations also provide a grace period during the transition to avoid missed payments and any penalties to the borrower.
If you ever receive a servicing transfer notice and have questions, give us a call at (760) 930-0569.
