Who is my "loan servicer?" Is that the same as my lender or investor?
Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they could also own your loan; however, many loans are owned by groups of investors and these investors hire loan servicers to interact with borrowers on their behalf. Also, many lenders no longer interact with their borrowers; they too have the loan servicers handle all contact with borrowers.
Traditionally, banks used money deposited in customers' savings accounts to make loans. They held the loans, earning the interest as borrowers repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing borrowers repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money for banks to lend.
Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers.
If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
How to find out if your loan servicer is participating:
Participation is mandatory for servicers of loans owned or guaranteed by Fannie Mae or Freddie Mac (Government Sponsored Enterprises or GSEs). Participation in HAMP is voluntary for servicers of non-GSE loans. However, substantial incentives are available to servicers, investors and borrowers who complete modifications under HAMP, and most major servicers already have committed to the Program. A current list of participating servicers is available at www.MakingHomeAffordable.gov/contact_servicer.html or download a PDF.
Servicers not currently listed had until Dec. 31, 2009 to opt into the program.
Servicers of non-GSE loans sign a contract with Fannie Mae, as Treasury's financial agent, through which they agree to review every potentially eligible borrower who asks to be considered for the Making Home Affordable Program. To ensure that a borrower currently at risk of foreclosure has the opportunity to apply for a modification under HAMP, participating servicers may not proceed with a foreclosure sale until the borrower has been evaluated for a HAMP modification and, if eligible, a trial modification offer has been made.
3 - 4 Month Trial Modification Requirement: For modification to be complete, if borrower is delinquent prior to modification, borrowers must make 3 payments within 90 days at the new modified payment level and be current at day 90. If the borrower is current at the time of modification, the borrower must make 4 payments within 120 days at the new modified payment level and be current at 120 days.
Borrower Incentive: Borrower(s) are eligible to receive Pay-for-Performance Success that goes towards reducing principal of $1,000 each year for five years if they stay current on their mortgage loan — up to $5,000 maximum.
Counseling Requirement: If the borrower has a back-end ratio (borrower total monthly debt ratio) equal to or greater than 55%, HUD approved housing counseling is required. Servicers are required to send a letter to borrowers informing them of the counseling requirement. The borrower must acknowledge in writing that s(he) will obtain such counseling at a HUD-approved housing counseling agency. Borrowers can also receive FREE counseling by calling the Homeowner's HOPE Hotline, 888/995-HOPE or look here to search for a HUD-approved housing counselor.
For more information about the Home Affordable Modification Program, please visit www.financialstability.gov
Note: The Streamlined Modification Program (SMP) and the Early Workout Program expired in March 2009.