How Brokers Can Help Clients

August 30, 2021

Brokers and lenders help originate and close mortgage loans. But you also are vital in instructing clients. Typical functions include advertising, working with potential borrowers, underwriting mortgage applications to see if borrowers can afford to repay the loans they’re requesting, and advancing loan funds to borrowers so they can buy homes. Orion’s brokers know that a mortgage servicer is responsible for collecting the monthly payments and allocating them correctly to principal, interest, and escrow accounts.

 

The primary function of a servicer is to manage and track borrowers’ monthly payments. Brokers will instruct clients that when monthly payments are sent to the mortgage servicer, it sends principal and interest to the mortgage holder. If a client is paying mortgage insurance premiums, the servicer collects that money and sends it to the right place, as well. Mortgage servicers must provide borrowers with a statement for each billing cycle that shows the current payment due, the previous payment made, any fees the servicer has charged (such as late payment fees), any transaction activity (such as an insurance payment made from the borrower’s escrow account) and the servicer’s contact information.

For borrowers with escrow accounts, mortgage loan servicing also includes collecting payments for property taxes and insurance and sending those payments to the right place to make sure the borrower stays current. Servicers also have to respond to borrowers’ requests for information about their accounts, including inquiries about errors. If your client finds an error in their account, the servicer is required to look into it and either correct it or notify your client that no error occurred. Servicers also work with borrowers in forbearance, and struggling borrowers to help them avoid foreclosure, and they initiate foreclosures when borrowers consistently can’t keep up.

Normally, if your client falls behind on their mortgage payments, the servicer is required to contact them in writing by the 45th day of the delinquency and tell the client what loss mitigation options are available (such as loan modification and short sale). If a mortgage is more than 120 days delinquent, the servicer may be able to start the foreclosure process. These rules have been significantly altered under the coronavirus pandemic for homeowners whose mortgages are owned by either Fannie Mae or Freddie Mac, the two big government-sponsored entities. The government continues to try to extend a moratorium prohibiting foreclosures on these loans.

You should tell your clients that the servicer will periodically check to make sure homeowner’s insurance or flood insurance is being carried to match requirements, and they will tell the client how much insurance must be carried and how to provide proof of that coverage. If someone fails to comply, the servicer can put forced place insurance (also known as lender-placed insurance) on the property(and add the cost onto the mortgage balance) after notifying your client at least 45 days before charging for it. If you put your client into an adjustable-rate mortgage, the servicer is responsible for telling them when the interest rate will change. They also have to give servicing clients an estimate of the new rate and monthly payment. Finally, if your client decides to refinance or payoff the mortgage, the servicer has seven business days to tell them the payoff amount.

 

Orion’s brokers can continue to add value long after the loan closes by being able to be subject matter experts for clients, including servicing!


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