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Loan Servicing

The investor has their choice of loan servicing for payments. They can choose to service the loan themselves, have the mortgage broker handle it, or hire an independent servicing company. Loan Servicing includes but is not limited to collecting payments from borrowers, disbursing payments to lender or note holders, mailing appropriate notices, along with monitoring the status of taxes, insurance, and other junior liens. The loan servicer also can coordinate foreclosure proceedings. Secure Deeds recommends having an independent servicing company handle loan payment servicing. The servicing company will provide an agreement to the lender at the closing of the loan, describing their services. The agreement also provides instruction on where to send payments, whether mailed or direct deposited.

The servicing agreement should also specify what person or entity has the authority to instruct the trustee under the deed or trust in the case of a NOD (notice of default) or NOS (notice of trustee's sale). This person or entity is often the lender themselves, which allows the lender to proceed in the manner they choose in those default situations, whether they decide to use their own attorney or someone else. The servicing agent should also provide you with a detailed accounting of the payments and principal balance at either the end of each year or when requested throughout the year. Some servicers will offer to keep the original promissory note and trust deed for the term of the agreement. Make sure to request a written receipt acknowledging the servicer has these items in their possession and make copies for your records.

The servicing agreement should also describe how and under what circumstances you or the servicing agent may terminate the loan servicing agency. For example, a provision regarding termination should require written notification with a minimum notice period such as 30 days, and any applicable fees or charges as a result of termination. 

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