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LOAN CLOSING
Once you have helped us clear up any conditions to your loan, we will schedule a closing date with a title and escrow company or closing attorney, whichever is the common practice in your area. At closing you will sign the documentation to take ownership of your home (if you are purchasing) or transfer your home loan to us (if you are refinancing), as well as get title insurance for your home. If your loan is an ‘escrow’ loan, you will deposit an amount to fund your escrow account, which we will maintain to pay the property taxes and hazard insurance premiums on your home as they come due. You will receive a ‘settlement statement’ that will detail all of your expenses in the transaction, as well as how your loan proceeds were distributed. You will also receive a title policy that insures your ownership of the property (see “Title Insurance”). If there are repair items to your home that have not yet been completed, the title or escrow company or closing attorney may hold the funds to make the repairs and have you, the seller and the contractor who will do the work sign an escrow agreement for the funds.
After closing a loan, a lender typically “delivers” the loan to an investor and arranges for the administration or “servicing” of the loan, either by the originating lender, by the investor, or by a third party servicing company. Loan servicing includes receipt and tracking of monthly mortgage payments, related accounting to the investor and handling of customer inquiries. In addition, the loan servicer must ensure that all taxes and insurance premiums are disbursed from the escrow account to the proper taxing authorities and insurance carriers. The loan servicer must also complete and deliver to the borrower an annual escrow analysis to demonstrate that adequate funds are available to meet the projected tax assessments and insurance premiums. In the event of delinquencies, bankruptcies or foreclosures, the loan servicer represents the investor and handles all the legal notices, filings and other necessary actions to protect the investor’s interests. For all of these services, the loan servicer is compensated by receiving a small portion of the monthly payment from the borrower, usually between one-quarter to one-half of one percent.
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