If you have purchased a home, you likely obtained a home loan through a lender in order to fund the purchase. While you may think that this means you will pay the lender for the life of your loan, this is oftentimes not the case. The servicing of many loans is dealt with by a loan servicer, who is a separate entity from your lender. This can cause confusion and can sometimes lead to trouble for your mortgage.
What is a Loan Servicer?
When you apply for and obtain a home loan, your loan is issued by a lender. This can be a bank, a credit union, or an online lending company. The paperwork which you sign for your loan will have the lender's name on it and your first few payments may even be to the lender.
Just because you obtain your loan from a lender doesn't mean that you'll always pay the lender, however; the servicing of loans is very frequently sold to a loan servicer, whose job is to take care of the legwork for the lender.
What is the Loan Servicer's Role?
Loan servicers essentially take on the responsibilities of a lender while ultimately remitting the funds of your loan to the lender whom you purchased your home through. Typical roles of loan servicers include the following.
- Taking your mortgage payments, processing the payments, and sending the payments to your lender.
- Responding to questions about your mortgage.
- Managing your escrow account on behalf of your lender.
- Keeping track of what you have paid in principal and interest toward your loan.
- Reviewing you for loss mitigation options, such as a loan modification, if you run into financial trouble.
- Bringing a foreclosure action against you if you stop making payments on your loan.
Be on the Lookout for Servicing Issues
When it comes to mortgages, loan servicers are a hassle for homeowners at best. In some cases, loan servicers can cause serious issues with your mortgage. If your loan is being handled by a loan servicer, be on the lookout for some of the most common servicing issues.
- Multiple loan servicers over the life of your loan. Your loan may be sold several times and can be sold in rapid succession, leading you to pay the wrong servicer.
- Not keeping adequate records. When your loan is transferred between multiple servicers, records of your payments may get lost in the shuffle, resulting in you showing to be behind on your mortgage.
- Misapplying funds. Loan servicers are notorious for putting money that should be applied to principal toward your interest payment or into your escrow account.
- Force-placing insurance. Always be sure to check your mail, no matter what. What may seem like junk mail may be your loan servicer requesting proof of insurance. If you don't respond, insurance might be force-placed upon you, resulting in a hike in your monthly payment.
Questions? We're Here for You
If you are in the process of applying for a home loan and have questions about loan servicers, or if you are being harmed by a servicer's mistakes, Melvin Monachan is here to help. To speak with a member of our legal team about your servicing issues, fill out an online contact form or call (347) 620-0565 today.