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What is a Mortgage Servicing Company?
A mortgage servicing company is a company that services the daily maintenance of a mortgage loan. In many cases, after a loan is taken out, and even if that loan is eventually sold to another bank or financial institution, the day-to-day operations is often handed over to another company. In taking this responsibility, the company gets to take a small percentage of the interest payment, perhaps 0.5%.
After a payment is received, the mortgage servicing company, or loan servicing company, credits those payments and then sends out a new statement. In some cases, the company used may change several times during the life of the loan; however, the bank may that receives the bulk of the payment may stay the same.
In the United States, if the mortgage servicing company does change, the borrower has some rights that go along with that. First, notification must be made 15 days in advance of the change. Also, the grace period is extended just in case the borrower sends a payment to the previous company. This grace period is 60 days. These provisions are detailed in U.S. federal law and cannot be amended.
In most cases, the processing of mortgages is good business. Most people make their payments each month on time, or may be slightly late from time to time. Further, with improvements in technology, the processing and maintenance of a loan is becoming increasingly automated. This is made possible by things such as electronic payments.
However, the expense for a mortgage servicing company increases dramatically once a borrower fails to pay consistently on time because the company then must pursue collections. In some cases, this is successful, but still represents an additional expense for the company. If collections are needed, the servicing company may have an agreement worked out with the mortgage holder to receive additional fees, up to 100% of the late fee, and maybe even more than that, depending on the amount of work involved.
If not successful with collections, the servicer must then work with the holder of the mortgage to determine the next steps in the process. That may include, but not be limited to, foreclosure. The servicing company could handle a foreclosure or leave that responsibility to the bank, depending on the agreement between the two entities.
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![The daily maintenance of a home loan is handled by a mortgage servicing company.]()
By: nitoThe daily maintenance of a home loan is handled by a mortgage servicing company. -
![A payment plan can be especially effective for lengthy loan paybacks like those found on mortgage agreements.]()
By: itsallgoodA payment plan can be especially effective for lengthy loan paybacks like those found on mortgage agreements. -
![A mortgage servicing company may handle foreclosure procedures.]()
By: Andy DeanA mortgage servicing company may handle foreclosure procedures.
Discussion Comments
@anon283422: Is it not on the county tax assessor's record who owns the parcel? There should be at least an address of an owner, and this is public record. You should be able to find the information at your county courthouse.
Maybe an attorney who specializes in real estate and mortgage matters could help you ferret out who the actual owners are.
I am desperately trying to find out who "owns" a property that I am trying to buy from B Of A. I have been in contact with prior owners, who went bankrupt, just recently vacated the home after three years of not making payments, and are willing to help us.
Mellon Bank is the trustee, B of A is the apparent holder of the loan, however they say they are no longer servicing the loan despite frequent calls to them. Also, the local tax collectors just received township taxes in April from B of A. What? The house is empty, needs attention, and we are willing but can find no one who knows anything. Any suggestions?
@horsebite - I know!! *So* frustrating!! I wish they would just tell us who to call. Or better yet, give me a web site that actually works so I don't have to talk to them at all!
I would like to see a law that requires you to get a contact number or person at the beginning of your loan, and that stays the same throughout. But I bet you will never see that, because it would inconvenience the banks.
@KLR650 - It may make the job easier for the big lender, but it doesn't necessarily make it easy for the guy no needs to contact his mortgage company for customer service.
These loans get sold from company to company, and then each company may have their own mortgage service center, so you keep getting letters saying to call this guy, no call that guy, no actually it's that guy over there. Very frustrating.
In and of itself, this isn't a bad business. It's just kind of a logistics service for big lending companies. The banks write the mortgage, then the mortgage service center and takes care of the administration of it. There are businesses that do this kind of thing in all kinds of industries.
It keeps the big lenders from having to hire whole departments to do the task in-house, not unlike an outsourced payroll, HR, or IT department would. Ideally, everybody wins. Except, I suppose, the people who used to do the job at the original lender.
These guys have gotten into a lot of trouble lately in the current housing crisis. Turns out they were so busy buying and selling mortgages between themselves they did not always keep up with the paperwork. So they are now trying to foreclose on people and finding out that they can't find any legal document that says they have a right to do so.
Anyone planning to open any kind of a business, take time to make sure you have a plan to do your due diligence and keep track of your paperwork. Do a little research on the housing crisis and you'll see why pretty fast.
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