A mortgage servicing company provides day-to-day maintenance services for a mortgage loan, and can take a small percentage of the interest payment. The borrower has rights when the servicing company changes, and collections can result in additional fees for the company. Foreclosure may be necessary if collections are unsuccessful.
A mortgage servicing company is a company that provides day-to-day maintenance services for a mortgage loan. In many cases, after a loan is taken out, and even if that loan is eventually sold to another bank or financial institution, day-to-day operations are often transferred to another company. By assuming this responsibility, the company can take a small percentage of the interest payment, perhaps 0.5%.
After you receive a payment, the mortgage servicing company, or loan servicing company, credits those payments and then sends you a new statement. In some cases, the company used may change several times during the life of the loan; however, the bank that receives the largest part of the payment can stay the same.
In the United States, if the mortgage servicing company changes, the borrower has some rights that go along with that. First, the notification must be made 15 days before the change. Also, the grace period is extended in case the borrower sends a payment to the previous company. This grace period is 60 days. These provisions are spelled out in US federal law and cannot be changed.
In most cases, mortgage processing is a good deal. Most people make their payments each month on time or may be a little late from time to time. Additionally, with improvements in technology, loan processing and servicing is becoming more and more automated. This is possible thanks to things like electronic payments.
However, the expense to a mortgage servicing company increases dramatically once the borrower consistently fails to pay on time because the company must pursue collections. In some cases, this is successful, but it still represents additional expense for the company. If collections are needed, the service company can work out an agreement with the mortgage holder to receive additional fees, up to 100% of the late fee, and perhaps even more than that, depending on the amount of work involved.
If collections are unsuccessful, the servicer should work with the mortgagee to determine the next steps in the process. That may include, but is not limited to, foreclosure. The utility company could handle a foreclosure or leave that responsibility to the bank, depending on the agreement between the two entities.
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