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A mortgage servicer handles tasks such as processing payments, generating your bill each cycle and disbursing payments for your property taxes and insurance. This may be a different entity from the bank or credit union that financed your loan, which is your lender. Some lenders handle servicing in-house, while others sell them to third parties to manage.
If you have a question or a problem – such as if you’re in danger of falling behind on your payments – you should contact your servicer immediately. Because your mortgage servicer manages your loan, you need to know who it is. You can find your servicer listed on your monthly statement, or you can look them up in the Mortgage Electronic Registration system website.
What a mortgage servicer does
The mortgage servicer ensures that all of the moving parts of your mortgage run smoothly. Some of the servicer’s responsibilities include:
Distributing shares of your payments to all the relevant parties, including your homeowners insurance company and tax collectors.
Issuing your statement every billing cycle.
Acting as a point of contact if you have a problem or questions about your loan.
Communicating with you right away if you’re delinquent, so that you don’t fall further behind on payments.
Developing a plan for you to get current and stay in the home, modifying the loan if necessary.
Working with you to create an exit strategy if, as a last resort, you can’t stay in the home. This may include initiating foreclosure proceedings.
Reaching out if your home has been affected by a natural disaster.
How your servicer can help if you’re behind on payments
If you’re struggling to pay your mortgage, your servicer may offer you a few options.
These could include:
Establishing a repayment plan, which would require you to make larger monthly payments until you’re current.
Entering forbearance, which would pause your mortgage payments for a period of time. This may apply if a financial setback such as an illness or job loss is preventing you from making payments. This won’t reduce the mortgage balance, but it will buy you time to navigate your situation.
Modifying the loan by changing the rate, terms or principal balance. For example, if you have 15 years left on your mortgage and the servicer modifies this to 30 years, you could make lower monthly payments because they are extended over a longer period. In this instance, you may end up paying more interest overall.
Depending on what type of loan you have and the entity that backs it (Fannie Mae/Freddie Mac, the Department of Veterans Affairs, the Federal Housing Administration, the USDA or, if it is a nonconforming loan, the lender itself), the servicer may have limited options to present.
No matter which path is the best for you, it’s crucial to contact the mortgage servicer immediately when a problem arises. This maximizes your options and gives you a better chance of remaining on good terms and staying in your home.
How to know who your mortgage servicer is
Your mortgage servicer should be listed on your monthly statement. You may also be able to look it up in the Mortgage Electronic Registration Systems database. This private company tracks data about loans and servicers and allows borrowers to look up a servicer by address and other information.
If your loan is sold to a mortgage servicer, your lender or previous servicer is required to notify you at least 15 days before the transfer. The new servicer has 15 days after the transfer to give you its information (if you’ve not already received it) so that you can direct your payments to the correct place. The new servicer can’t charge you late fees within the first 60 days of the transfer, so you’re protected if you accidentally send your payment to the wrong place.
Why do lenders sell mortgage loans?
There are two main reasons your lender might sell your loan to a mortgage servicer. Firstly, the sale allows it to have more money to lend to other borrowers. Second, selling enables the lender to outsource the costs of managing the loan.
When you first get a mortgage, the lender is required to let you know whether it will sell the servicing rights before the first payment (which means all your payments will go to another company), or if it will start off servicing it but reserve the right to sell it. The lender may also service it entirely itself. Regardless, the terms of your loan won’t change.
Servicers tend to be large institutions that carry various financial products — buying mortgages helps them grow a pool of long-term clients. Servicers also make a small amount from interest payments.
» MORE: Why lenders sell off mortgages
How to contact your servicer
The simplest way to contact your servicer is to call, though you should send a letter if you’re requesting information or detailing a dispute, as your servicer must respond within a certain time frame.
According to the Consumer Financial Protection Bureau, your mortgage servicer is required to acknowledge your letter within five business days of receiving it, and generally must respond to its content within 30 days, not including weekends and holidays. If it needs more time to investigate your claim or request, it must send you a written notice that it will get back to you within another 15 business days.