Definition:
Servicing refers to the day-to-day management of a mortgage loan after it has been issued. This includes collecting payments, managing escrow accounts, sending statements, and providing customer support to the borrower.
Example:
After Carla buys her home, she sends her mortgage payment each month to GreenTree Loan Services. GreenTree handles her property tax payments from her escrow account and sends her an annual mortgage statement. This entire process is known as servicing the loan.
Explanation:
Once a mortgage loan is finalized, someone must handle the practical responsibilities of managing that loan for the duration of its term—this is what servicing covers. Whether done by the original lender or a separate loan servicing company, the tasks include:
- Collecting monthly mortgage payments
- Applying funds to interest, principal, taxes, and insurance
- Maintaining escrow accounts
- Sending statements and tax documents
- Following up on missed payments
- Handling customer inquiries
- Processing loan payoffs
The servicing function can be transferred or sold without changing the terms of the mortgage. Borrowers are notified if their loan servicing is assigned to a new company. Despite the change, nothing about the loan terms—such as interest rate, monthly payment, or due date—should change.
Servicing also plays a crucial role when a borrower needs help—whether requesting forbearance, a payment plan, or a loan modification.
Why is Servicing Important in Real Estate Transactions?
Servicing keeps mortgage operations running smoothly long after the home sale closes. For buyers, the servicer becomes their main point of contact for anything related to the mortgage. It’s important to know who services your loan, how to reach them, and what responsibilities they manage. This ensures payments are applied correctly and allows for proper support throughout the life of the loan.