What Is The Difference Between A Loan Servicer, Investor, Lender and Bank?
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, yet they don’t own most of the loans they have.
Loan servicers are the ones that handle your short sale file for the most part, at least initially. Keep in mind they are usually located in a cubicle in another state, so they won’t know the difference between Georgia Real Estate laws and say, Florida Real Estate Laws.
This “entity” isn’t the same kind of investor that you are likely thinking of (the kind that “invests” in buying homes). 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.
In a longer more convoluted answer, when you got your mortgage, it was put into a “pool of loans” then sold to an investor while the “servicing” rights were sold to another party. To add to the confusion there’s also parties that “back” or insure the loan.
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.
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.
What Is The Difference Between A Loan Servicer, Investor and Lender as it relates to a short sale?
When you start your short sale process you start by talking to the loan servicer. Often they will take your package and evaluate it. In many cases, they will know if they can move forward but in some cases all they do is put the “file” together. From there they send it to the Investor for approval. If the investor approves the short sale, they will send it back to the servicer.
If you caught all of that then you also need to know that in that exchange there may be little things that either the investor or the servicer will do to hinder your short sale.
Keep in mind that servicers can sometimes get paid to “service” the loan whether you make a payment or not. If they are getting fees for your loan they might be inclined to drag their feet.