What Is The Difference Between A Loan Servicer, Investor, Lender and Bank?

What Is The Difference Between A Loan Servicer, Investor and Lender?

Loan Servicer

This entity is essentially like a “property manager.”  They simply collect the payment and process it.  They also act as a buffer between the home owner and the “investor.”  Most loans have “servicing rights” that can be sold.  So the owner of the loan can retain these rights, sell them or have companies sell and transfer these rights to one another.   This is why sometimes home owners will get a notice that they need to write payments to another “bank.”  Bank of America is the largest servicer of loans in the world.

Investor

This “entity” isn’t the same kind of investor that you are likely thinking of.  Fannie Mae, Freddie Mac, FHA, and Bank of New York are all “investors.”  Investors are sometimes lenders, sometimes banks but not always.  In a short sale, the investor is the one who “owns the paper” or owns the mortgage.

Lenders

This entity “lends” the money.  Most home buyers will confuse this one with “bank” and many times it is the bank but not always.  The lender then can keep the loan or sell the loan as a package.  When you hear mortgage professionals speak about “fannie mae guidelines” then you know they are doing a loan and it will be sold to fannie mae.  They may retain servicing rights or sell those as well.

Banks

This isn’t so much as an entity as it is often a misnomer to describe who you are dealing with.  A bank could be a lender or an investor or a loan servicer or all three.