Introduction
When you take out a mortgage, you expect a smooth and hassle-free payment process. However, what many homeowners don’t realize is that their loan servicing can be handled by a mortgage subservicer rather than the original lender. If your mortgage is transferred to a subservicer, it’s crucial to understand how they operate and what to expect.
In this guide, we’ll break down everything you need to know about mortgage subservicers, mortgage servicer reviews, and how to evaluate a subservicer before they take control of your loan.
What is a Mortgage Subservicer?
A mortgage subservicer is a third-party company hired by a lender, investor, or mortgage servicer to manage loan servicing responsibilities. Sub-servicer don’t own your loan but handle essential duties such as:
- Collecting mortgage payments
- Managing escrow accounts
- Handling customer service
- Assisting with loan modifications
Mortgage subservicers work behind the scenes, but their performance can directly impact your mortgage experience.
Mortgage Servicer vs. Mortgage Subservicer: What's the Difference?
FeatureMortgage ServicerMortgage SubservicerOwns the loanYesNoHandles borrower paymentsYesYesManages escrow accountsYesYesProvides customer serviceYesYesCan be hired by lender or investorNoYes
A mortgage servicer is responsible for loan management, but it may hire a subservicer to perform the actual servicing duties.
Why Do Lenders Use Mortgage Subservicers?
Lenders and investors often prefer to use subservicers because they:
- Reduce operational costs by outsourcing servicing responsibilities.
- Ensure compliance with regulatory standards set by federal agencies.
- Provide better borrower support through established systems and processes.
Mortgage subservicers handle the heavy lifting, allowing lenders to focus on providing new loans.
What Does a Mortgage Subservicer Do?
1. Collecting Mortgage Payments
Subservicers manage your monthly mortgage payments by:
- Processing online and mailed payments.
- Applying funds to principal, interest, and escrow accounts.
- Sending out late payment notices when necessary.
2. Managing Escrow Accounts
A subservicer ensures that property taxes and homeowners insurance are paid on time. This prevents tax liens or lapses in coverage.
3. Handling Customer Support
Borrowers can contact their subservicer for:
- Mortgage statements and payment history.
- Loan modification options.
- Addressing escrow or billing concerns.
4. Managing Delinquencies and Foreclosures
If a borrower falls behind on payments, the subservicer handles:
- Late payment notices and penalty assessments.
- Loan workout or modification programs.
- Foreclosure proceedings if necessary.
How to Evaluate a Mortgage Subservicer Before Your Loan is Transferred
1. Read Mortgage Servicer Reviews
Before your mortgage is transferred, research online reviews for the new servicer. Look for:
- Customer complaints about lost payments or escrow mismanagement.
- Positive feedback on responsiveness and problem resolution.
- Overall rating on platforms like the Better Business Bureau (BBB) or Trustpilot.
2. Check Regulatory Compliance
A reliable subservicer must follow regulations from:
- Consumer Financial Protection Bureau (CFPB)
- Federal Housing Administration (FHA)
- State mortgage servicing laws
3. Assess Customer Service Quality
Key signs of a reputable subservicer include:
- A responsive support team with multiple contact options.
- Clear billing statements and payment tracking.
- Online tools for managing your mortgage account.
4. Watch Out for Hidden Fees
Some subservicers charge unnecessary fees, including:
- Payment processing fees.
- Late payment penalties.
- Unexplained escrow adjustments.
Always review the servicer’s fee structure before your loan is transferred.
5. Evaluate Technology and Online Access
A top-rated subservicer offers:
- Easy online payments and account access.
- Mobile-friendly servicing portals.
- Automated alerts for payment due dates.
Common Issues Homeowners Face with Mortgage Subservicers
1. Poor Customer Service
Many homeowners complain about:
- Long wait times when calling customer support.
- Lack of clear answers to important loan questions.
2. Escrow Mismanagement
Errors in escrow accounts can cause:
- Overpayments or shortages in tax and insurance payments.
- Lapsed insurance coverage due to missed payments.
3. Mishandling Loan Modifications
Borrowers applying for loan modifications report:
- Delayed processing and lost documents.
- Lack of communication about modification status.
4. Unexpected Loan Transfers
Mortgage loans are frequently transferred between servicers, leading to:
- Confusion over payment due dates.
- Delayed payments that result in incorrect late fees.
Top Mortgage Subservicers in the U.S.
Some of the most well-known and reputable mortgage subservicers include:
- LoanCare
- Mr. Cooper (formerly Nationstar Mortgage)
- Dovenmuehle Mortgage
- Shellpoint Mortgage Servicing
- PHH Mortgage Services
These companies handle millions of loans and have mixed reviews depending on the borrower’s experience.
What to Do If You’re Unhappy with Your Mortgage Subservicer
1. Contact the Subservicer Directly
Before taking further action, call customer support to explain your issue and request a resolution.
2. File a Complaint with the CFPB
If the servicer does not resolve your issue, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB).
3. Request a Servicer Transfer
In some cases, borrowers can request their lender to transfer servicing to a different company.
Final Thoughts
A mortgage subservicer plays a crucial role in managing your home loan, and their performance directly impacts your experience as a borrower. Whether you’re dealing with a loan transfer or choosing a new mortgage servicer, it’s essential to do your research, read mortgage subservicer reviews, and understand your rights. By staying informed, you can avoid common servicing pitfalls and ensure a smooth mortgage experience.
Frequently Asked Questions (FAQs)
1. Can I choose my mortgage subservicer?
No, your lender or loan owner assigns the subservicer. However, you can refinance with a lender that services its own loans.
2. How do I find out who my mortgage servicer is?
Your mortgage statement will include the name of your servicer. You can also look it up on the Mortgage Electronic Registration Systems (MERS) website.
3. What should I do if my subservicer mishandles my escrow payments?
Contact the servicer immediately to request a correction. If they fail to resolve the issue, file a complaint with the CFPB.
4. Are mortgage subservicers regulated?
Yes, they must follow federal and state mortgage servicing regulations, including those set by the CFPB and FHA.
5. Can my loan be transferred to a different subservicer?
Yes, mortgage servicing transfers are common. Borrowers must receive a notice before their loan is transferred.