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Questions and Answers
What is the main purpose of servicing a loan after it has closed?
What is the main purpose of servicing a loan after it has closed?
- To manage loan maintenance tasks on behalf of the investor (correct)
- To negotiate loan terms with borrowers
- To collect pre-approval documents from the borrower
- To disburse loan funds to the borrower
What occurs when the lender force-places insurance on a property?
What occurs when the lender force-places insurance on a property?
- The borrower chooses a cheaper insurance provider
- The lender purchases insurance at a lower cost
- The property insurance is not required anymore
- The insurance is added to the borrower's total debt (correct)
Under what condition can Private Mortgage Insurance (PMI) be canceled at the borrower's request?
Under what condition can Private Mortgage Insurance (PMI) be canceled at the borrower's request?
- When the loan balance is at more than 85% LTV
- When the loan balance reaches 80% LTV based on origination value (correct)
- When the loan is refinanced without new PMI
- When the property value increases significantly
What is NOT a responsibility of a loan servicer?
What is NOT a responsibility of a loan servicer?
What must lenders do if FEMA reanalyzes flood risk and changes a flood zone determination to zone 'A'?
What must lenders do if FEMA reanalyzes flood risk and changes a flood zone determination to zone 'A'?
What is a primary duty of servicers regarding borrower inquiries?
What is a primary duty of servicers regarding borrower inquiries?
How are mortgages affected when force-placed insurance is required?
How are mortgages affected when force-placed insurance is required?
According to the Homeowners Protection Act, what happens to PMI when the loan is paid down to 78% LTV?
According to the Homeowners Protection Act, what happens to PMI when the loan is paid down to 78% LTV?
What action must servicers take regarding records after loan terms have been met?
What action must servicers take regarding records after loan terms have been met?
What is the effect of a servicing company selling servicing rights to another servicer?
What is the effect of a servicing company selling servicing rights to another servicer?
Flashcards
Loan Servicing
Loan Servicing
The process of managing a loan after it has been closed. This includes tasks such as collecting payments, managing escrow accounts, handling insurance, and processing foreclosures.
Servicer
Servicer
A company or entity responsible for handling the day-to-day management of a loan after it is closed.
Escrow Account
Escrow Account
An account used to hold funds for taxes, insurance, and other payments related to the property securing the loan.
Force-Placed Insurance
Force-Placed Insurance
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Flood Insurance
Flood Insurance
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Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI)
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PMI Cancellation
PMI Cancellation
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Servicing Transfer
Servicing Transfer
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Providing Accurate Notices
Providing Accurate Notices
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Investigating Borrower Complaints
Investigating Borrower Complaints
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Study Notes
Loan Servicing
- Loan servicing begins after loan closing and continues until loan terms are fulfilled.
- It's the ongoing maintenance of a loan, often by a third-party servicer for a fee.
- Servicing rights are an asset, potentially sold to other entities.
- Servicers can be originating lenders, different lenders, servicing companies, or others.
Servicer Responsibilities
- Collecting payments: Includes proactive efforts to collect late payments.
- Escrow account management: Handles payments for taxes, insurance, and mortgage insurance.
- Escrow Account Analysis: Provides annual reporting to borrowers.
- Property Insurance: Forces insurance if borrowers don't maintain it (more expensive). The cost is added to the loan.
- Flood Insurance: Ensures borrowers with flood-prone properties maintain appropriate flood insurance. Collected in escrow, and updated based on FEMA determinations to comply with regulations and flood zone status changes.
- Notices & Information: Provides timely and accurate information to borrowers and investors.
- Complaints & Inquiries: Investigates borrower complaints and responds to inquiries, even credit reporting.
- Foreclosures: Processes foreclosures, provides information, and evaluates loss mitigation options. Followed legal procedures and acquire property possession.
- Mortgage Claims: Files insurance and guarantor claims.
- Repossessed Property Management: Manages and reviews services for disposal.
- PMI Cancellation: Closes PMI programs on loans, following HPA or PMI Cancellation Act conditions that may include 80% LTV and the initial loan value at origination. Cancellation occurs automatically at 78% LTV. Special concerns and conditions apply for high-risk mortgages.
- Information Transfer: Ensures smooth transition or transfer of information and documents when servicing changes hands.
- Records Retention: Retains records for one year after loan is closed or transferred.
- Payoffs: Processes requests and pays off balances.
- Loan payoff completion: Records loan payoff with appropriate county officials.
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