When you pay a mortgage on your home every month, it can sometimes seem like there are so many entities involved in the transaction. One entity you consistently keep hearing from is your mortgage servicer. What exactly does your mortgage servicer do?
If you want to keep your home after falling behind on your mortgage, your goal should be to find a solution, such as a loan modification, that will return your loan to “normal servicing” and allow you to avoid foreclosure.
What Is Loan Servicing
Loan servicing is the process by which a company collects money from a borrower and manages their loan. Your mortgage loan servicer is the company you send your mortgage payments to. They're like an accounts receivable department that collects your payments and distributes the funds to the investor that owns your loan, collecting a fee for themselves in the process.
You have no say in who services your mortgage, and servicing rights can transfer. One month you're making mortgage payments to Cenlar, the next it's to Ocwen. If you don't like it, too bad. You have no say in the matter.
When you have a problem with your mortgage, it can be very challenging to get your loan servicer to work with you to fix it. Applying for a loan modification, many homeowners feel like their bank actually wants them to fail so they can foreclose on their home.
To state the obvious, when you're contacting your bank it's because something's gone wrong, such as divorce, illness, or loss of income. Maybe all three at once. Something's caused you to be unable to pay your mortgage and be at risk of losing your home to foreclosure. It's an awful situation to be in.
Fortunately for you, there's this amazing thing that could permanently lower your monthly payment to an affordable portion of your income and enable you to keep your home. It's called a loan modification, and it works by changing the length of your loan term, interest rate, and/or reducing principal. It costs nothing to apply and there are no closing costs.