What’s the Difference Between a Mortgage Lender and a Mortgage Servicer?
A mortgage lender loans money for a home to borrowers. A mortgage servicer handles the daily functions of mortgages. A mortgage lender can also be a loan servicer. Lenders and servicers both have policies and procedures that companies are required to follow, and both are regulated by the federal government.
For people considering purchasing a home, there are several issues that have to be considered. One of the biggest considerations is finding a lender that will approve a loan. Depending on the borrower's financial situation, attaining a mortgage could be a relatively simple process or a test of endurance. When a person applies for a loan, he does this through a company that can offer money in exchange for a mortgage. This company is known as the mortgage lender. If the loan is approved, then the lender gives the money to purchase the home to the borrower, who then uses the funds to buy the house. The borrower then owes the lender for the amount borrowed to buy the home, plus interest.
Once the loan is created, it has to be processed. Processing includes making sure the loan is awarded to the borrower and that the borrower applies the loan to the intended purchase. Processing also includes tracking loan payments, ensuring reminder notices are sent in the event payments are missed and filing foreclosure documents in the event too many payments are missed. These activities are completed by mortgage servicers.
A mortgage lender and a mortgage servicer both help people attain mortgages for homes. In some cases, a mortgage servicer takes over where a mortgage lender stops. But mortgage lenders can also be mortgage servicers. If the lender is set up to handle deposits, such as a bank or financing company, the company can also service the loan. For lenders who cannot process deposits, that is when a servicer would be used. According to Quicken Loans, the use of lenders or servicers can also vary by state, depending on the laws of the state.
Simply put, the company that receives the loan payments is the mortgage servicer. Many local lenders also serve as the processor since a small lender, such as a local bank or credit union, might not have a large number of loans on its books. However knowing who is servicing the loan might be more difficult if a larger lender is used since these lenders tend to sell mortgages to other companies. In those cases, there are several ways to determine the servicer of a mortgage. According to the Consumer Financial Protection Bureau, the servicer for a loan is listed on the payment coupons or the top of the payment statement. Visiting the MERS® Servicer Identification System website can also provide this information.