Borrowers don’t get to choose their loan servicers
Generally speaking, you won’t have much contact with your mortgage servicer.
But if you run into payment problems or need to remove your mortgage insurance, you’ll have to engage with them in more depth.
Unfortunately, it’s not easy to change mortgage servicers if you’re unhappy with yours.
The only way to switch is through refinancing — but even then you can’t control where the loan will end up.
Here’s what you should know about mortgage servicers, and what to do if you’re unhappy with yours.
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- Can I change mortgage servicers?
- Should I refinance to change loan servicers?
- What to do if you’re unhappy with your servicer
- About mortgage servicing companies
- Mortgage servicer FAQ
Can I change my mortgage loan servicer?
Borrowers don’t get to choose who services their loans. In fact, they don’t get a say at all.
After you close your loan, the lender is free to sell it to an external company. That company can also sell the loan, without the borrower’s approval, at which point your servicer may change.
While all of this may sound complicated — and it is — it mostly goes on behind the scenes.
No matter how many times your mortgage is sold, the original terms will not change. The only way your loan terms can change is if you decide to refinance.
When a new owner is transferring your loan to a different servicer, you’ll receive written notice that includes any information you need to know about continuing to pay on your loan.
But no matter how many times your mortgage is sold, the original terms will not change.
It’s wise to review your payment information after a transfer, especially if you’re set up for automatic withdrawals, to ensure that you won’t be late on your installments.
However, you don’t have to worry that the terms you agreed to or your payment amounts will be nullified.
Should I refinance to change mortgage loan servicers?
The only way to change your mortgage servicer is to refinance your mortgage with a different lender.
However, there is no guarantee the new lender will not sell the loan to a servicer with which you’ve had bad experiences in the past.
Even if your new lender currently services its own mortgages, it may change that policy in the future. Borrowers simply have no influence on servicing decisions.
A change in servicers could be a nice bonus when you refinance, but it shouldn’t factor into your decision.
Because of this, it’s wise to avoid refinancing unless there are other benefits to you. For example:
- If your income and credit score have improved since you initially took out the loan, you may qualify for a better interest rate now by refinancing
- You might also refinance to shorten your repayment term — maybe from a 30-year fixed loan to a 15-year mortgage — and pay off your home sooner
- If you need cash for a big upcoming expense (such as a home renovation) or you want to consolidate debt, you might do a cash-out refinance to tap your home’s equity.
There are plenty of reasons to refinance your home, but changing loan servicers shouldn’t be one of them. That’s because you can’t control how the loan is managed.
A change in servicer can be a nice bonus when you refinance, but it shouldn’t factor into your decision.
Verify your refinance eligibility
What to do if you’re unhappy with your mortgage servicer
Ideally, you’ll make your payments without a hitch and your servicer relationship will be relatively uneventful.
But that’s not always how it goes. Unfortunately, some homeowners do have bad experiences with their mortgage servicing companies.
And these issues have been exacerbated during COVID-19 as servicers deal with an unprecedented wave of mortgage forbearances.
If you’ve had bad experiences with your loan servicer, such as a lack of responsiveness or negative practices, here are some ways to handle the situation.
- Document every conversation. Keep records of every interaction you have with the company, including the names of employees with whom you spoke, what they told you, and the date the conversations took place. As you escalate the issue through the company, it will help to have detailed notes to refer to so you can hold the organization accountable
- Have a clear plan of action. Before speaking with the company, have a clear goal in mind and be prepared to articulate your desired outcome. Ask to speak with the appropriate manager or representative for filing complaints
- File a complaint with the Consumer Financial Protection Bureau (CFPB). The CFPB allows you to submit a complaint online, though you’ll want to organize all of your notes, receipts, and conversation transcripts before you file. You’ll need to provide the name of the company about which you’re submitting the complaint, any relevant people involved, and the details of the problem
About mortgage servicing companies
When you take out a mortgage with a particular lender, you might assume you’ll work with that lender throughout the life of your loan.
But that’s often not the case.
Once a lender closes your mortgage loan — meaning you’ve signed the final documents and received the money — they can either keep your loan and service it in-house or sell it.
If the lender keeps the loan and services it in-house, you’ll continue to deal with them directly. That’s who you’ll send payments to and who you’ll work with if you need a forbearance.
But oftentimes a mortgage lender will sell its loans to another company.
This company is your ‘mortgage servicer’ — it will collect your payments and manage your loan for as long as you keep it.
What do mortgage servicing companies do?
Mortgage servicing companies take on all of the administrative duties associated with your mortgage.
For one, they collect your monthly payment and distribute it to all of the relevant parties. A portion goes to your lender, some goes to property taxes, homeowners insurance premiums get sent to your carrier, and so on.
Your servicer will also manage any changes mid-loan term.
For instance, if your home has reached 20% equity and you want to talk about getting rid of PMI, your servicer is the company to contact.
Or, if you’re having trouble making payments and need to ask for mortgage forbearance, your servicer would handle that change as well.
Do any lenders service their own loans?
Why do lenders sell their mortgage loans to investors or other companies? A few reasons.
- Lenders want to save on administrative costs
- They want to streamline the number of loans they’re managing so they can focus on originating new loans. This may be more cost-effective than providing servicing to all their customers
- Lenders can also make a profit on loan sales
Not all lenders sell their mortgages, however.
Some major companies, such as Quicken Loans, US Bank, and Chase tend to service their own mortgages.
If you borrow through a local credit union or bank, they may also keep their servicing in-house. You’re free to ask about this when you apply for a mortgage, if you wish.
When another company does buy the loan, they also have the option to manage it in-house or to sell collection rights to a mortgage servicing company.
Mortgage servicer FAQ
When your mortgage is sold, your lender transfers the loan and its management to a third party. The sale doesn’t change the terms of your mortgage, but you may have to send payments and inquiries to the new owner’s servicer.
Your mortgage servicer handles your payments, as well as forbearance requests and other issues you have with your loan, so it’s important to know who your servicer is.
But since you don’t have control over who the servicer is, it’s best to focus on finding the best possible mortgage product and interest rate, rather than worrying about who you’ll make payments to down the road.
No, borrowers do not choose who services their mortgage. If you’re unhappy with your servicer, you’ll need to refinance to a new loan, using a lender that does not work with that servicer.
However, the new loan could be sold to your current servicer eventually, so it’s not worth refinancing just to change who manages your loan.
Yes, the current loan holder can sell it to another company.
The servicer should be listed on your monthly mortgage statement. You can also look up your loan servicer through the Mortgage Electronic Registration System (MERS) database.
A mortgage lender loans you the money for your home purchase. The lender is the company you’ll work with to set up your loan — from application through to closing.
A mortgage servicer manages the account after it’s closed, including monthly payments, PMI cancellation, forbearance requests, and any moves you make to pay off your mortgage early.
Lenders and servicers sell loans for different reasons. They may sell to have more liquid cash, or they may want to reduce their overhead since loan servicing requires personnel and other resources.
Check your monthly mortgage statement or look up who your servicer is through the MERS website. Once you have your servicer’s name, you can likely find their contact information through its site.
You can file a complaint through the website of the Consumer Financial Protection Bureau.
