“Loan servicing” refers to all the administrative aspects of a loan from the time the loan is approved until it is finally paid off in full. It includes a wide range of different actions and legal/financial matters and can last a long time because it will last for as long as it takes for the loan to be fully paid off.
All of the aspects of a loan transaction prior to loan servicing are called “loan origination.” Loan origination includes background checks on the borrower, calculating risk or potential of default on the loan, and negotiating loan terms. Sometimes the same company performs both origination and servicing, but oftentimes different companies perform those tasks.
What Does Loan Servicing Cover?
Loan servicing covers aspects such as:
- Sending monthly statements for client payments
- Collecting the monthly payment amounts
- Maintaining payment records
- Checking payment balances and debt amounts
- Dealing with related issues like taxes and insurance
- Managing escrow funds
- Remitting excess funds to the payer
- Checking up on delinquent payments
Thus, loan servicing often involves the month-to-month invoices and regular bill statements involved in paying off a loan.
Who Performs Loan Servicing?
In some cases, the company that provided the loan is also the same entity that handles loan servicing. As mentioned, loan origination and loan servicing are often performed by the same entity. This can happen for instance with larger mortgage loan companies. However, this is not always the case. In some instances, the rights to perform loan servicing are contracted out to a secondary company that specializes strictly in loan servicing. This is usually done for a fee.
If the company that issued the loan to you starts out performing loan servicing, then transfers the loan servicing activities to a different company, you are supposed to receive notice of this transfer. The notice should come from both the original loan servicer and the new one. Loan servicing violations can often lead to private civil lawsuits, especially if the violations cause economic damages to the borrower.
Do I Need a Lawyer for Help with Loan Servicing Issues?
Loan servicing can cover a long period of time, sometimes several months or even years. This means that there is often a chance that legal disputes or issues can arise in connection with the loan servicing. You may need to hire a bankcruptcy lawyer if you need help filing a lawsuit over loan servicing issues. Your attorney can provide you with legal advice, guidance, and representation during the litigation process. Also, if you have any specific legal inquiries, your attorney can perform the necessary research needed to address your concerns.