What is Mortgage Servicing?

This  3 minute video offers highlights from the description of mortgage servicing below.

Effectively servicing a mortgage loan is critical to successful homeownership.

Mortgage servicers collect homeowners’ mortgage payments and pass on those payments to investors, tax authorities, and insurers, often through escrow accounts. Servicers also work to protect investors’ interests in mortgaged properties, for example, by ensuring homeowners maintain proper insurance coverage.

If homeowners fall behind on their payments, the servicer’s role is to work with the homeowner and help them get back on track. If that is not possible, the servicer pursues a loan modification (if the homeowner is eligible) or explores an alternative to foreclosure, such as a short sale or deed in lieu of foreclosure. If a foreclosure is unavoidable, the servicer initiates the foreclosure process and manages the property until it can be appropriately transferred or sold.

Effectively servicing a mortgage loan is important for supporting successful and sustainable homeownership and includes the following:

  • Processing and crediting homeowners’ payments accurately and on time
  • Building a relationship with customers and being a key point of contact for resolving problems, should hardships arise
  • Communicating with homeowners early when payments are missed to help the homeowner avoid falling further behind
  • Working with delinquent homeowners to determine if they can afford to stay in the home
  • Ensuring homeowners know all their options if they fall behind, such as a loan modification, short sale, or deed in lieu of foreclosure
  • Helping with options for a graceful exit in instances when the homeowner can no longer pay the mortgage and needs to leave the home.
  • Being one of the first communication points for homeowners in communities affected by natural disasters or economic troubles and helping homeowners navigate the claims process with home insurers

Servicers may also play an important role in neighborhood stabilization and revitalization.

If homeowners can no longer pay their mortgages and must leave their homes, servicers are responsible for a process called property preservation. Property preservation ensures that the lawn is mowed, the house is maintained, and the property is cared for, even if the home is vacant. By ensuring that the property does not look abandoned or run down, property preservation helps maintain property values in neighborhoods experiencing foreclosures. Also, properly maintaining vacant homes helps keep neighborhoods safe.

Finally, servicers are often responsible for ensuring that municipalities receive the tax income they are due by forwarding borrowers’ property tax payments directly to the proper authorities. This amounts to billions of tax dollars collected and paid.

For additional information on mortgage servicing, visit these pages:

  1. Who is involved with mortgage servicing?
  2. What is default servicing?
  3. How does securitization affect mortgage servicing?