Mortgage Servicing: What Happens After I Get My New Mortgage Loan
Overview
Mortgage loans contain some of the longest repayment periods across all financing instruments. With loan terms that can last up to 30 years, it should be no surprise to learn that borrowers will end up making their payments to different companies throughout the lifetime of the loan.
Furthermore, it is entirely possible and even likely that the mortgage company that originates your mortgage will not even collect a single payment, as there is a strong chance that they will assign your new mortgage loan servicing to another lender quickly.
Why Does This Happen?
The short answer to this question is that most loans are sold on the secondary mortgage market shortly after being funded to allow Wall Street investors to continue to fund new mortgages. Residential mortgages are collateralized and used as an investment tool in many pension and retirement funds. You can think of a loan servicer as a middleman who provides the service of collecting payments between the individual borrower and these investors.
There are a few reasons why most mortgage banks stay away from loan servicing. Firstly, loan servicing requires large amounts of capital for little return on investment. Second, the number of mortgages in existence is so large that collecting payments requires large amounts of infrastructure. Third, collecting payments is a different business model than determining creditworthiness and mortgage origination.
Prominent Loan Servicers
- Quicken Loans
- Flagstar
- Pennymac
- Mr. Cooper
- United Wholesale Mortgage
- JPMorgan Chase
- Bank of America
- Wells Fargo
Additional Housekeeping
When making extra payments always call your servicer first to determine how they will be treated (Pre-payments vs additional principal payments). Most servicers allow you to recast your loan.
Conclusion
While it might seem inconvenient to have to make payments to different loan servicers over the lifetime of your loan, rest assured this is a standard business process. Expect your loan servicer to be different from the company which originated your mortgage. The positive is that these loan servicers are generally courteous and will be there to help you set up your online portals and make your payments. They also offer great apps that you can download to your smartphone as well to help you easily manage your mortgage account.
At Bluefire Mortgage Group, we are here to answer any questions you may have about financing a mortgage. Feel free to contact us at (760) 930-0569 and one of our loan officers will assist you.
