A mortgage lender is a bank or financial company that lends money to borrowers to buy a home. A mortgage agent handles the processing of payments and is the company that sends the monthly statements to the borrower. A mortgage lender or a bank can be both the loan provider and the mortgage administrator. Both lender and loan manager have specificities policies and procedures they are required to follow, and both are regulated by the federal government.
The mortgage lender is the bank or credit union that most people interact with when they apply for a mortgage. The local bank’s mortgage representative will educate the borrower on the different types of mortgages, the interest rates for each product, and how much to spend on the down payment.
The borrower will need to present proof of income such as pay stubs and other financial information when applying for the loan. The lender will also perform a credit check, which consists of a review of the borrower’s credit history, number of accounts opened, amount of debt, and payment history. Any negative information on the credit report, such as late payments, will affect the chances of approval and the interest rate charged by the lender. Once approved, the local bank or lender will organize the closing, that is, when the documents are signed and the mortgage is legally registered.
During the term of the mortgage, the borrower will owe the lender the amount borrowed to purchase the home, plus interest. Each of the monthly payments will be used to pay off the mortgage, with a portion of each payment being used to pay the interest owed on the loan. Another part of the payment will go towards paying the principal or the original amount borrowed.
However, sometimes the lender will hire another company to handle all the payment processing after the loan is booked. These companies are mortgage service companies.
A mortgage manager is usually an outside company that assists in loan processing, which may include ensuring that the loan is granted to the borrower and that the borrower applies the loan to the intended purchase. Processing also includes tracking loan payments, sending reminder notices for missed payments, filing foreclosure documents in the event of loan default.
Fault this is when payments have not been paid for a while and are unlikely to be paid in the future. If a renegotiation of the loan conditions cannot be concluded, the mortgage becomes effective. foreclosure. Foreclosure is a process by which the bank takes possession of the house and sells it back to recoup the loan losses.
Mortgage lenders can also be the mortgage manager. If the lender is configured to handle deposits, such as a bank or finance company, the company can also handle the loan. A mortgage service company may come into play when a lender cannot hold deposits. Each state has its own laws and regulations on how mortgage loans are managed and the role of banks and service companies.
If you want to know if a mortgage service company is involved in your mortgage, the Consumer Financial Protection Bureau suggests checking the return address of the business at the top of your statement or payment coupons. If the address is not that of the bank that originally granted you the loan, the loan is likely to be processed by a service company. In addition, visiting the MERS® Servicer Identification System website can help identify the supplier.
Key points to remember
- A mortgage lender is a bank or financial company that lends money to borrowers to buy a home.
- A mortgage agent handles the processing of payments and is the company that sends the monthly statements to the borrower.
- If your mortgage is sold, you will have a new service provider, who should notify you of their address to send payments within 30 days.
Why Mortgage Service Companies Exist
Although some banks keep the loans they originate from, many other banks sell the mortgages to service companies. The service company takes care of the loan process and handles all payments. Selling a mortgage allows banks to initiate new loans, as banks have limits on how much they can lend, which can be based on a number of factors, including the amount of deposits the bank has holds. In addition, a bank can make more profit by initiating new mortgages than by managing existing mortgages.
Mortgages are bought and sold through the secondary mortgage market—Many of which are sold to Fannie Mae or the National Federal Mortgage Association (FNMA). Fannie Mae bundles several existing mortgages as investments, called Mortgage Backed Securities (MBS). Individuals can invest in an MBS and earn a rate of return based on the mortgage interest rates on the investment.
If your mortgage is sold, you will have a new service provider, who will give you their address to send payments. According to the Consumer Financial Protection Bureau or CFPB, the new lender or service company that purchased your mortgage must “notify you within 30 days of the effective date of the transfer. The notice will disclose the name, address and location. telephone number of the new owner. “