"Mortgage servicing" is a term you may not have heard until today however, it is something that affects every single homeowner that uses financing. The Mortgage Servicer is the company that will collect your monthly mortgage payments and make sure they go where they need to.
There are dozens of entities involved in the process of paying your mortgage every month, and Mortgage Servicers help navigate this on your behalf.
You will not meet your servicer until after your loan closes. This is because your loan could be sold or kept in-house. This can impact who ends up as your servicer.
Selling Your Loan
After lenders close your loan, they generally will sell your loan to an investor. These investors are often government entities or government sponsored entities. These investors help the mortgage market keep moving. As the lenders complete the loans, the investors then buy the loans and free up the lenders to fund more mortgages. Who your loan is sold to will determine exactly which servicer is used and how that will impact you monthly.
If your lender retains your loan, then it is their responsibility to service your loan and collect your monthly payments. Unless you work with a large mortgage lender, they will use a sub-servicing company. A sub-servicer will collect the monthly payments, communicate with you and deal with any payoff demands on behalf of the lender.
Collecting Your Monthly Payment
Your servicer will collect your monthly mortgage payment. They will have their own policies about how and when to collect it. They will take your PITI (principal, interest, taxes and insurance) payment and disburse it to the correct parties on your behalf.
Principal & Interest
Your principal and interest payment take up the largest portion of your monthly payment. The mortgage servicer will collect this and deliver it directly to the lender/investor. This ensures that your payments are being made correctly and on time.
Just like income, homeowners must pay taxes on their home too. Your mortgage servicer will collect your taxes and deposit it directly into an escrow account. This will be saved here and paid on your behalf when the taxes come due.
Similar to taxes, insurance is collected monthly and deposited into an escrow account. When your premiums are due, the mortgage servicer will transfer the funds from your escrow account to your home insurance provider.
Your mortgage servicer will also communicate on behalf of the lender/investor. They will be able to help answer any questions you have and notify you on items pertaining to your loan. This helps you get better customer service than the lender/investor would be able to provide themselves.
Have questions about the mortgage servicing process or want to chat about getting pre-approved? Click here and schedule time to speak with one of our local Jersey mortgage specialists. We have branches in Cranford, Manasquan, and Parisppany to help you with all of your homeownership needs.