Financial experts often tell homeowners to make sure their lender will also be the institution “servicing” their home loan. But many homeowners disregard this advice or don’t understand it. So what is loan servicing and why does it matter? Here are your questions, answered.
What is Loan Servicing?
Loan servicing is the administrative side of a home loan, which involves receiving your payments and applying them to your loan, managing your account and contacting you, if needed. The servicer has a long term relationship with you throughout the duration of your loan.
Who Services Home Loans?
By law, your lender must provide you with a Servicing Disclosure Statement. However, it is highly recommended that you ask a lender before you apply whether they service their own home loans or sell their servicing rights to others. It can be better if your lender services the loan themselves because you will have a long term relationship with them and you will know who you’re dealing with if anything goes wrong.
Why Do I Want My Lender to Service the Loan Themselves?
There are several reasons it’s in your best interest if your lender services your home loan:
- Customer Service.Your lender hopes you come back to them for future loans if you have a good experience with your current loan. They have a strong interest in providing you with top quality customer service—especially if they’re also you’re the bank you use for other services, such as checking and savings accounts. When they service your loan themselves, you can expect the same top-notch customer service for all of your banking needs. With a third party servicer, you are “just a number”, rather than an important relationship.
- No “Gatekeeper.”No matter who services your loans, it’s your lender who ultimately has to sign off on any modification requests you make. However if your loan servicing has been outsourced, you’ll first have to propose any modifications to the servicer and only then can you propose these changes to the final decision maker, your lender.
- Knowledge is Power.Many people have no idea who their servicer or lender is because their home loan has been transferred or sold so many times. When transfers occur, many errors can occur. In some cases, people have incorrectly faced foreclosure, until they were able to correct the new servicer’s information. Knowing the people who are servicing your loan reduces the risk of errors and can provide peace of mind.
For these reasons, we recommend you ask about servicing. Our loan servicing is done in-house to ensure quality for each and every one of you. Call us today and experience the difference.
