What is a loan servicer? The company that collects the mortgage payment, runs the escrow account and handles delinquency, which is often neither the lender that made the loan nor the investor that owns it.
A loan servicer is the company that administers a mortgage day to day: it takes the payment, runs the escrow account and pays the tax and insurance bills out of it, sends the monthly statement and the year-end interest form, and works the file if payments stop. It is frequently not the lender that made the loan and frequently not the investor that owns it. Servicing is its own asset, bought and sold as a right to a fee, which is why a loan changes servicers without the borrower changing anything.
Federal rule governs the handover. Under RESPA at 12 CFR 1024.33 the old servicer gives at least 15 days' notice before a transfer and the new one gives notice within 15 days after, and for 60 days after the transfer date a payment sent on time to the old servicer cannot be treated as late. Regulation Z requires an accurate payoff statement within seven business days of a written request, at 12 CFR 1026.36(c)(3), and requires a payment to be credited the day it arrives. A written notice of error under 12 CFR 1024.35 starts a clock for the servicer to investigate and answer in writing.
In practice that means the servicer is who to call and the sections are what to cite. A misapplied payment, an escrow account that does not match the county tax bill, a payoff quote that will not arrive: each has a rule behind it, and a written request rather than a phone call is what starts the clock. The Consumer Financial Protection Bureau takes complaints about servicers and forwards them for a response, which is the step after the servicer's own error resolution. Here the first-year escrow surprise is the most common reason a servicer gets called, and it is usually the county resetting the taxable value after the sale rather than anything the servicer did.
A worked example
A loan closes with one lender, is sold to an investor a month later and lands with a servicer the borrower has never heard of. The old servicer's notice arrives at least 15 days before the transfer, the new one's within 15 days after, and for 60 days a payment sent on time to the old address cannot be called late. A $2,212 payment does not change; only where it goes does.
Questions people ask
Can your mortgage be sold without your permission?
Yes. The note and the servicing rights are both transferable and the loan documents say so. What the borrower is owed is notice: at least 15 days before the transfer and within 15 days after, plus a 60-day grace on payments sent to the old servicer.
What do you do if a servicer misapplies a payment?
Send a written notice of error rather than calling. Under 12 CFR 1024.35 that starts a clock for the servicer to investigate and respond in writing. If it does not, the Consumer Financial Protection Bureau takes complaints and forwards them for a response.