Mortgage Servicers

One of the frequently asked questions (FAQ) about homeownership is whether you can complete your home purchase directly with a bank. It's confusing enough to have to work with different real estate professionals, including real estate agents and brokers. As a homeowner who went through a mortgage lender, you might think no other company has to be involved with a bank-owned home loan. But more often than not, a separate mortgage servicer will be involved.

Though mortgage payments make most borrowers think of traditional banks, most mortgage holders make their payments to separate mortgage servicers. Your mortgage servicer is not necessarily the same bank or credit union where you got your loan. Instead, it may be a separate company set up to handle and process mortgage payments.

• Mortgage servicing companies:
• Collect mortgage payments from homeowners
• Handle escrow accounts for homebuyers
• Credit and charge fees to the mortgage account
• Upon nonpayment, may initiate "default-related services" including foreclosure

Borrowers should monitor and maintain close contact with their mortgage servicers to:

• Ensure that mortgage payments are accurately credited
• Protect themselves from various fees
• Help avoid foreclosure

How Mortgages Change Servicers Over Time

In many cases, the bank that issued a mortgage sells that mortgage to a third party. Mortgage loans can change hands many times. Borrowers can often be confused about who actually owns their mortgage loan. If an unknown company contacts you about your mortgage out of the blue, you should ensure it's not a scam. Ask them to verify how they obtained your information and whether they have a pre-existing relationship with your bank. You may need to contact your bank independently to make sure the communication is legitimate.

The owner of the mortgage is not always the company that receives and processes the mortgage payment. This is because the mortgage owner, who is either the lender issuing the mortgage (or a subsequent purchaser of the mortgage), can sell or contract out the right to service that mortgage loan.

Depending on how ownership rights in a mortgage loan get sold and divided, the mortgage servicer may be:

• The mortgage owner, such as a bank
• An independent loan servicing company

Who Owns My Mortgage?

When ownership of the mortgage loan changes hands, you, as the borrower, should receive notice of the change. The new owner should give you written notice within 30 days of the transfer. You should also get notice from both the old and the new mortgage servicer. If you have questions about who currently services your mortgage, quickly contact the mortgage servicer to whom you've most recently been making payments.

A mortgage servicer might even acquire a mortgage or servicing rights after the mortgage is already in default. In this case, the mortgage servicer is a debt collector under federal law. That means you, as the borrower, have rights against unfair debt collection.

What Can a Mortgage Servicer Do Against a Home?

Mortgage servicers perform a wide variety of tasks in relation to mortgages. Some of these tasks include:

• Basic things like receiving and giving the borrower credit for mortgage payments
• Proactively taking many actions on a mortgaged home, particularly if the borrower fails to meet the terms of the mortgage agreement

Most importantly, when a borrower misses one or more payments, the mortgage servicer may initiate "default-related" services. This includes:

• Pre-foreclosure
• Judicial or non-judicial foreclosure sales

The servicer may do inspections of a soon-to-be foreclosed property. They'll want to make sure you're still living there and properly maintaining the property. Depending on the mortgage, if the mortgage servicer finds the property in disrepair, they have options. They can arrange for necessary work or repairs to be performed, such as landscaping. Like fees associated with foreclosure proceedings, the mortgage servicer bills the mortgage holder for the costs of repairs to the property.

Similarly, if you've not purchased home insurance required by the mortgage agreement, the mortgage servicer may purchase "forced place" insurance on your behalf. Forced place insurance usually costs more and provides less coverage than borrower-purchased insurance. Again, the mortgage servicer bills the mortgage holder for the costs.

Foreclosure Prevention Options

If you're facing foreclosure, you may be eligible to avoid the wrath of your mortgage servicer. Consider looking into contact information associated with the following:

• U.S. Department of Housing and Urban Development (HUD) housing counselors or other FHA housing counseling agency
• Consumer Financial Protection Bureau (especially if you're an active-duty service member or you have a Fannie Mae / Freddie Mac loan)
• Federal government programs like Making Home Affordable (MHA)

You can also avoid the foreclosure process through:

• Loss mitigation and loan modification
• Pre-foreclosure short sale
• Refinance

Disputes With Mortgage Servicers

It's vital that borrowers struggling to make payments keep close contact with their mortgage servicers. But you should also monitor and keep close contact with your mortgage servicer. Scrutiny of mortgage statements can confirm that:

• Your servicer properly credits you for payments made
• There aren't any unexpected or unclear fees

Should a mortgage holder dispute a fee charged by the servicer, a borrower should quickly notify the mortgage servicer. But you should not deduct the disputed amount from your mortgage payment. Deducting disputed fees from mortgage payments can lead to additional fees. It might even trigger mortgage default terms.

Talk to a Lawyer

A knowledgeable real estate attorney can help you navigate the complexities of your mortgage. They can also deal with your mortgage servicer. By quickly addressing the problem, you might be able to negotiate a solution. At the very least, you can prevent more fees associated with mortgage default and foreclosure.