The Difference Between Mortgage & Loan Servicer
If you are thinking of buying a home or business property, you may be wondering how you should borrow the money needed for this property. From understanding loans and mortgages processes, to knowing the difference between paying loan servicers and paying mortgage servicers, there is much to know before making a decision about how to proceed.
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To Mortgage or to Loan
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To understand the differences between a mortgage servicer and a loan servicer you will first need to understand the differences between a mortgage and a loan. While both a loan and a mortgage are a type of debt, a mortgage is a debt secured by a property, and a loan involves redistribution of financial assets over time.
Loan Servicer
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When securing a loan from an establishment such as a bank, the lender may often contract a loan servicer to manage the collection. This loan servicer will work for the lending company to collect loan payments, deal with late payments and take care of everything from forecloses and default loans to property taxes. The hired loan servicer will report the details of the loan to the original lender. A loan servicer does just as the name implies--service your loan for the lender.
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Mortgage Servicer
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Although you may think that your original lender for your mortgage will hold your account for the duration of your payback time, this is not usually the case. Mortgages are easily bought and sold. Your lender may sell your mortgage, and you'll find yourself making payments to a mortgage servicer. Although a mortgage servicer may be the original lender, most often they are not. They will, however, be responsible for your mortgage loan and will handle everything from payments to foreclosures.
Handling Loan and Mortgage Servicing Issues
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Unlike a loan servicer, a mortgage servicer does not work for the lender. Instead, they own the mortgage and are your new contact info for all issues with your mortgage. In the case of a loan servicer, you may still contact the original lender if you are having issues with the loan servicer because the original lender still owns your loan.
How Servicers Get Paid
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Loan servicers are responsible for all activities involved in servicing your loan and are hired by the lender. They get to retain a certain percentage of the monthly loan payment for taking care of all services. Mortgage servicers own your mortgage and have already paid for it upfront. They pay less than your loan amount for rights to the mortgage, and once you have paid in full, they make their profit.
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References
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