After your loan closes and funds, your loan is boarded for servicing. Servicing involves the ongoing administration of your loan. Servicing handles anything from mortgage payments, payment of escrowed items like property taxes and homeowners insurance, homeowners insurance claims, etc. The servicing team can also be a resource for you if you have questions about next steps after your loan closes.
Your lender may retain your loan in its servicing portfolio if it is set up to do so, but there is always a possibility that your loan will be transferred to an outside servicer. The lender makes this decision based on a number of factors but not necessarily on the specific details of your loan, so the decision is not a reflection on you or your relationship with the lender. Even if your lender retains your loan, they may employ the assistance of a third party sub-servicer to facilitate certain servicing tasks, like collecting your monthly mortgage payments.
Rachel de Villava, National Servicing Manager at Castle & Cooke Mortgage, reveals three things you should know about loan servicing:
1. Your loan may be transferred to a third party at any time.
After closing and funding have occurred, it is possible that your loan could be transferred for servicing to a third party at any time during its term. In some cases, your lender may not know if, or to whom, the loan will ultimately be transferred until after closing. If your loan is to be transferred, you will be notified. Regardless, you will receive a welcome packet with information and instructions from either your lender or their sub-servicer, or the party to which your loan is being transferred.
2. Your monthly mortgage payment may increase over the loan term.
Once your loan is boarded for servicing, there is always a possibility the amount of your monthly payment could increase due to changes in the escrowed portion of your payment, which consists of property taxes and homeowners insurance premiums. While the principal and interest portions of your payments will remain the same for the life of a fixed-rate mortgage, any changes in taxes or insurance will impact your total payment amount.
An escrow analysis is performed on your loan at least once a year to ensure there are sufficient funds in reserve. Any excess funds in your escrow account will be refunded to you at that time, while any shortage will be requested from you. If additional funds are requested, you may have the option to submit them in a lump sum, or have it distributed among your monthly payments.
3. You may receive more than one 1098 for the tax year in which your loan closed.
By the end of January in the year following the closing of your loan, you may receive more than one interest statement for tax purposes. You may receive one from your lender for closing costs and fees associated with the closing of your loan in the prior year. You will also receive one from the servicer, which will include mortgage interest, real estate taxes and mortgage insurance (if applicable) paid in the prior year. Be sure to report all 1098 mortgage interest statements received on your tax returns. Going forward, you will typically only receive one mortgage interest statement from the servicer of your loan, unless you engage in additional mortgage transactions. Consult a tax professional for more information regarding the tax treatment of mortgage interest.
Castle & Cooke Mortgage, LLC® (NMLS #1251) is a leading independent mortgage lender headquartered in Draper, Utah, with locations across the United States.
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