Servicing

Servicing may refer to:

See also

Loan servicing

Loan servicing is the process by which a company (mortgage bank, servicing firm, etc.) collects interest, principal and escrow payments from a borrower. The vast majority of mortgages are backed by the government or government-sponsored entities (commonly referred to as "GSE's") through purchase by Fannie Mae, Freddie Mac or Ginnie Mae (which purchases loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA)). Because the GSE's and private loan investors typically do not service the mortgage loans that they purchase, the bank who sells the mortgage will generally retain the right to service the mortgage pursuant to a master servicing agreement.

The payments collected by the mortgage servicer are remitted to various parties; distributions typically include paying taxes and insurance from escrowed funds, remitting principal and interest payments to investors holding mortgage-backed securities (or other types of instruments backed by pools of mortgage loans), and remitting fees to mortgage guarantors, trustees, and other third parties providing services. The level of service varies depending on the type of loan and the terms negotiated between the servicer and the investor seeking their services, and may also include activities such as monitoring delinquencies, workouts/ restructurings and executing foreclosures.