LOAN SERVICING (ADMINISTRATION)

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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