What Are Mortgage Servicing Rights?

Mortgage servicing rights (MSRs) give a company the right to collect your mortgage payments and manage your loan. When you get a mortgage, the bank that gave you the loan might sell these rights to another company. This means you’ll send your monthly mortgage payments to a different company than the one that originally gave you the loan.

Your loan terms, including interest rate, balance, and repayment schedule, remain unchanged when servicing is transferred. Servicing transfers is a standard practice in the mortgage industry, so understanding this process can help you navigate any changes to your loan management.

What is mortgage servicing?

Mortgage servicing is the behind-the-scenes work that manages your mortgage activity. Once your loan closes, a loan servicer manages the flow of money, keeps records, and ensures all the requirements of your mortgage are met.

Typical mortgage servicing responsibilities include:

• Collect payments: Each month, your servicer accepts your mortgage payment, splits it into principal, interest, taxes, and insurance, and sends it where it needs to go.
• Manage escrow accounts: Some servicers will pay your property taxes and homeowners’ insurance payments for you through the use of an escrow account. This ensures on-time payments and means less due dates for you to remember.
• Provide customer service: Your servicer is the company you call if you have questions about your loan balance, want a payoff statement, or need help setting up autopay.
• Handle delinquencies: If you miss a payment, the servicer applies late fees, sends notices, and may work with you on repayment options. They are also the ones who would begin foreclosure if the loan remains unpaid and goes into default.

In short, your mortgage servicer is the company you deal with regularly, because your original lender no longer owns the right to service your loan. In addition, this scenario means the original lender would likely not be able to support you with any questions or issues related to your loan moving forward. 

How do mortgage servicing rights work?

When a lender closes your mortgage, they can choose to keep the servicing rights or sell them. Selling MSRs means transferring the right to manage your loan to another company. That company earns a fee for handling the loan and any income tied to late charges or escrow balances.

Within three business days of applying for a mortgage, your lender must give you a Loan Estimate. On page three of your Loan Estimate, a checked box will show whether the lender intends to keep servicing your loan or transfer it. If servicing will be transferred, your closing documents will also include a Servicing Disclosure Statement that names the company receiving the rights.

Servicing can still be transferred later, either right after you close or at any point during the life of the loan. If that happens, you will receive advance written notice so you know when the transfer takes effect and where your next payment should go.

For borrowers, servicing transfers are routine and do not change the terms of your mortgage. You will simply start paying a new company instead of the old one.

What happens in a servicing transfer?

Here is what you can expect when MSRs are sold:

• Goodbye letter: Your current servicer will notify you that your loan is being transferred.
• Hello letter: The new servicer introduces themselves and gives you new payment instructions.
• Grace period: Federal law requires a 60-day window where payments sent to the old servicer cannot be considered late.
• Borrower action: Update autopay details, mailing instructions, or online accounts to ensure your payments go to the right place.

Why do lenders sell mortgage servicing rights?

Lenders often sell MSRs to free up resources so they can continue making new loans. Servicing loans requires dedicated staff, compliance systems, and technology, which not all lenders are equipped to specialize in. 

Think of it like a store outsourcing its customer service hotline. The product you bought stays the same, but a different company handles your questions. In the same way, selling MSRs allows lenders to focus on originating loans, while servicers specialize in the ongoing management.

For borrowers, this means it is common for your loan to change hands. A transfer does not mean anything is wrong with your mortgage. It is simply business as usual in the mortgage industry.

What does it mean when a lender sells MSR?

When MSRs are sold, your mortgage terms stay locked in. Your balance, interest rate, and repayment schedule do not change. The only difference is who you make your monthly payments to.

What borrowers should do after a servicing transfer:

1. Read both notices carefully. Keep the goodbye and hello letters in your records.
2. Confirm payment instructions. Use the details from the hello letter, not just what you find online.
3. Update autopay. If you pay electronically, reset your bank or servicer’s online portal.
4. Check your escrow balance. Verify that your insurance and property taxes are still paid on time after the transfer.
   

What do third-party mortgage services do?

Third-party mortgage servicers, often nonbank companies, now manage millions of loans in the United States. Even if you closed with a large bank, your loan might be serviced by a company you have never heard of.

Their responsibilities include:

• Sending your monthly statements.
• Accepting and tracking your payments.
• Paying your property taxes and insurance from escrow.
• Applying late fees or offering repayment options if you fall behind.
• Providing documents like payoff statements when you sell or refinance.

Because these companies focus solely on servicing, they often have the systems to manage large volumes of loans efficiently. For borrowers, that can mean quicker online tools or more specialized support. The tradeoff is that you may need to get familiar with a new company name and website when your loan transfers.

Mortgage servicing rights determine who manages your mortgage, not the details of your loan. If your lender sells the MSR, you will simply send payments to a new company. Your balance, rate, and repayment schedule do not change. By paying attention to transfer notices, confirming your payment details, and checking your escrow account, you can navigate a servicing transfer with confidence.

Thinking about buying a home? Get pre-qualified with us at Zillow Home Loans.* The process takes as little as five minutes with no impact to your credit score.

*Zillow Home Loans, an equal housing lender. NMLS #10287.