Perhaps one of the most confusing aspects of getting a mortgage is knowing who you actually pay once the thing funds. And to that end, when your first mortgage payment is due.

While Bank X may have closed your loan, an entirely different company could send you paperwork and a payment booklet. What gives?

Well, this highlights the difference between a mortgage lender and a mortgage servicer.

Mortgage Lender vs. Mortgage Servicer

• The bank or mortgage lender processes and funds the home loan
• Once it closes it may be sold off to a loan servicer or retained in portfolio
• The job of a loan servicer is to collect monthly mortgage payments
• And manage escrow accounts if your home loan has impounds

As noted, a mortgage loan servicer, also known simply as a loan servicer, is the company that collects your monthly mortgage payments.

They also manage your escrow account if your home loan has impounds, collecting a portion of property taxes and homeowners insurance each month, before making those payments on your behalf when due.

So really, there’s a good chance you’ll deal with your loan servicer a lot more than your mortgage lender, who may have only been in the picture for a month or so while your loan was originated.

You see, many mortgage lenders focus on loan origination as opposed to servicing, so they’re happy to fund your loan and quickly sell it off for a profit, then rinse and repeat.

The same goes for mortgage brokers, who fund your loan on behalf of a wholesale mortgage lender, which also may sell off the loan to a different servicing company shortly after it closes.

Further complicating all this is the fact that your mortgage lender could also be your loan servicer because some big banks and mortgage companies can profit from it.

One thing mortgage companies figured out in recent years was that keeping in touch with their past customers was a great way to generate repeat business.

But if they sell all their home loans off to other companies, they may lose out if mortgage rates fall and these customers are ripe for a mortgage refinance.

There are also mortgage subservicers, companies that perform loan servicing tasks on behalf of a lender, instead of completing those things in-house.

Anyway, without getting too convoluted here, it’s important to note this distinction between lender and servicer so you know who you’re dealing with.

And to ensure you’re sending monthly mortgage payments to the right place!

What Do Loan Servicers Do?

• Collect monthly mortgage payments
• Manage escrow accounts (property taxes and homeowners insurance)
• Provide customer service if borrowers have any questions
• Generate loan payoff statements
• Perform loss mitigation (loan default, loan modifications, foreclosure, credit reporting)
• Ensure compliance with federal, state, local regulations

The list above should give you a better idea of what loan servicers do, and why banks and lenders may choose to outsource these things.

If you have any questions regarding your home loan post-closing, it’s generally best to get in touch with your loan servicer as opposed to your mortgage broker or lender.

They should be able to answer any questions you have, whether it’s knowing where to send payments, how to make extra payments or biweekly mortgage payments, loan amortization questions, and so on.

Additionally, if having payment troubles in the future, your loan servicer should be the one to call to discuss options.

Remember, the lender is typically just there to help process and close your loan, then hands off the reins to a servicer from there.

Mortgage Servicing Transfers

• Many home loans are transferred to loan servicing companies shortly after funding
• You should receive a letter within 15 days of your loan being transferred
• The new company’s contact information should be prominently displayed
• It will also include the date when the old servicer will no longer accept payments
• And the date when the new servicer will start accepting monthly payments

One of the most important things to do after your mortgage closes is to take note of who your loan servicer is.