Mortgage
Post-Closing Process (After Primary Market)
Once the mortgage loan has closed and is funded, the post-closing team
ensures all documents are accurate, complete, and properly recorded.
Key Post-Closing Activities:
1. Document Verification:
o Verify signed documents (Note, Deed of Trust/Mortgage,
Closing Disclosure, etc.).
o Ensure missing signatures, errors, or discrepancies are
resolved.
2. Loan Package Submission:
o Final loan package sent to investors (e.g., Fannie Mae, Freddie
Mac) or held in the lender's portfolio.
3. Recording:
o Send mortgage/deed to county recorder’s office for public
record.
4. Insuring:
o Loans insured by FHA, VA, or USDA must go through
respective agencies for mortgage insurance approval.
5. Shipping & Delivery to Secondary Market:
o Loan is either:
Sold to an investor (secondary market), or
Transferred to a servicer for ongoing management.
6. Loan Boarding (Servicing Transfer):
o Transfer loan data and documents to the servicing department
or external servicer.
Mortgage Servicing Process
Servicing begins after loan boarding and continues until the loan is fully
paid off. The servicer is responsible for managing the loan day-to-day,
including collecting payments and managing escrow accounts.
Departments & Functions in Servicing
Department Function
Answers borrower inquiries, updates contact
Customer Service
info, handles general loan questions.
Posts payments, handles returned payments,
Payment Processing
reconciles accounts.
Manages escrow accounts, pays property taxes
Escrow / Tax & Insurance and insurance premiums, handles escrow
analysis.
Collections / Early-Stage Contacts borrowers who are behind on
Delinquency payments (1–59 days delinquent).
Assists borrowers facing hardship via
Loss Mitigation forbearance, repayment plans, loan
modifications.
Manages the legal process for foreclosure after
Foreclosure Department
default (typically after 120+ days delinquent).
Handles loans where the borrower has filed for
Bankruptcy Department
bankruptcy.
Prepares reports for investors (Ginnie Mae,
Investor Reporting
Fannie Mae, Freddie Mac) on loan performance.
Issues payoff statements and manages loan
Payoff Department
payoff and lien release.
Customer Escalations / Handles CFPB complaints, legal escalations, and
Executive Resolutions regulator-related inquiries.
Servicing Lifecycle Stages
1. Loan Boarding
o Import loan data from closing/post-closing system.
o Verify documents and data accuracy.
2. Monthly Servicing
o Payment collection and posting.
o Escrow administration.
o Customer service support.
3. Escrow Analysis (Annual)
o Ensure enough funds in escrow to pay taxes/insurance.
o Adjust monthly payment if needed.
4. Delinquency Management
o Soft collections start after 1 missed payment.
o Hard collections, legal notices, and foreclosure initiated if
unresolved.
5. Loss Mitigation (if delinquent)
o Evaluate for forbearance, repayment plans, loan modification,
partial claim.
6. Payoff / Loan Termination
o Payoff request received.
o Lien released upon payment in full.
Notes on Servicing Transfers:
Loans may be transferred between servicers.
A Goodbye Letter is sent by the old servicer.
A Welcome Letter is sent by the new servicer.
The borrower should not experience a lapse in service.
This is my personal understanding of mortgage servicing.
Specifically, when we talk about U.S. mortgages, there are two basic
components:
1. Mortgage Production – This includes the entire process of loan
origination, loan underwriting, loan processing, closing, and funding.
2. Mortgage Servicing – This refers to the operation of managing and
maintaining all records and servicing activities. It includes
coordination with various departments such as default servicing,
loss mitigation, escrow analysis, payment processing, and more. The
lender may also transfer servicing rights from one service provider
to another.
Default servicing
1. Collections / Early-Stage Default
When it happens: Typically, 30–89 days delinquent.
Activities:
o Reminder calls, emails, and letters to borrowers.
o Offering repayment options.
o Discussing hardship situations.
o Collecting any past-due payments.
🔹 2. Loss Mitigation
When it happens: Begins early but intensifies at 60–90+ days
delinquent.
Purpose: Avoid foreclosure by finding a workout solution.
Options include:
o Repayment plans
o Forbearance
o Loan modification
o Partial claim (FHA loans)
o Payment deferral
o Short sale or deed-in-lieu (as last options)
🔹 3. Foreclosure
When it happens: Typically, after 120+ days of delinquency (based
on CFPB rules).
Process:
o Legal action initiated to recover the property.
o Varies by state (judicial vs non-judicial foreclosure).
o Includes title review, publication of notice, court filings, and
auction.
🔹 4. Bankruptcy Servicing
When borrower files for bankruptcy protection.
Servicing actions:
o Monitor bankruptcy court status.
o Follow automatic stay rules.
o File Proof of Claim (POC), Motion for Relief, etc.
o Apply post-petition payments separately from pre-petition
arrears.
o Coordinate with borrower’s attorney or trustee.
🔹 5. Real Estate Owned (REO) Management
When: If the foreclosure is completed and the property does not sell
at auction.
Servicer’s Role:
o Manage and maintain the property.
o Market the property for resale.
o Dispose of the asset to recover remaining funds.
🔹 6. Escrow and Insurance Management (Post-default)
Handling: Force-placed insurance if homeowner’s policy lapses.
Managing: Property taxes and insurance to protect the investor’s
collateral.
Summary Table
Type of Default Stage of
Focus Area
Servicing Delinquency
Contact borrower, collect
Collections 30–60 days late
payments
Avoid foreclosure with relief
Loss Mitigation 60–120+ days late
options
Legal process to recover the
Foreclosure 120+ days late
home
Comply with court process, Any stage (if
Bankruptcy Servicing
manage claims borrower files)
Manage/sell property post-
REO Management After foreclosure
foreclosure
Maintain and protect During and after
Property Preservation
property default
Escrow/Insurance (Post- Handle taxes, force-placed
As needed
default) insurance
Loss Mitigation – This process helps borrowers who are experiencing
financial hardship to retain ownership of their homes. Based on investor
guidelines and lender instructions, we develop and offer appropriate plans
such as repayment plans, forbearance, loan modifications, or other relief
options to assist the borrower.
This is loss mitigation types-
1. Forbearance
What it is: Temporarily reduces or suspends payments for a set
period.
Post-forbearance options: Repayment plan, deferral, or loan
modification.
Best for: Temporary hardship such as job loss, medical emergencies,
or natural disasters (e.g., COVID-19 relief plans).
2. Loan Modification
What it is: A permanent change to one or more terms of the loan
(e.g., interest rate, term, principal balance) to make payments more
affordable.
Types of modifications:
o Rate reduction
o Term extension
o Principal forbearance or forgiveness
o Capitalization of arrears
🔹 3. Partial Claim (for FHA loans)
What it is: The lender advances funds to bring the mortgage current,
secured by a second lien (subordinate mortgage) that's payable
when the loan is paid off.
Used with: FHA-backed loans only.
🔹 4. Payment Deferral
What it is: Missed payments are moved to the end of the loan term
as a non-interest-bearing balance, due at payoff.
