A servicer or mortgage servicer is a company that handles long term customer service once a mortgage loan (whether it’s a reverse mortgage or traditional “forward” mortgage) is funded. The servicer’s job is to handle ongoing account maintenance throughout the life of the loan.
The role of your mortgage servicer
A mortgage servicer handles your inquiries and requests for funds, monitors property charge payments, distributes LESA payments, and facilitates the settling of the loan balance once it becomes due and payable. The mortgage servicer also handles numerous unseen tasks to ensure compliance with FHA and HUD guidelines.
The company that funded your loan may not be the same company that services it long term. Not every mortgage lender is large enough to handle servicing as well. If your reverse mortgage is funded by a small broker or lender, chances are it will be transferred to a servicer after it is funded. Note that the terms of the loan do not change.
It’s possible your loan could be transferred to yet another servicer in the future. Again, the existing terms of the loan do not change.
You’ll typically receive a welcome packet from your servicer within a few weeks of the completion of your reverse mortgage. You can contact your servicer at any time to request funds, get questions answered, and restructure your payout options.
You’ll also begin receive monthly statements that present a complete breakdown of your loan balance, interest rate, and funds available.
It’s a good idea to include your servicer’s contact information in your estate documents so your executors/heirs know how to reach them.
The annual occupancy check
HUD requires that you live in your home to keep your reverse mortgage in good standing. Your servicer will mail a form every year asking you to certify that the home is still your primary residence. It’s important to return this form promptly (usually within 30 days) or the servicer may assume you’re no longer living in the home, which could trigger a maturity event and make the loan due and payable.
Though you’re required to live in your home, it doesn’t mean you can’t be away for long periods traveling or receiving medical care. Generally speaking, you’re allowed to be absent from your home for up to twelve months without risking the loan being called due. If you plan to be absent for longer than twelve months, you must obtain permission from HUD.
If you have a repair set-aside
If your loan was closed with a repair set-aside, be sure to complete the repairs and let your servicer know as soon as possible. Your servicer will confirm the repairs are complete and release the funds in the set-aside back to you. If the repairs aren’t completed within 12 months, HUD authorizes your lender to freeze any available proceeds in your reverse mortgage until the repairs are complete.
If you have a LESA
If your reverse mortgage was closed with a LESA, your servicer will handle the payment of your property taxes, homeowner’s insurance, and flood insurance (if applicable). Note that the LESA is not guaranteed to pay your taxes and insurance for the rest of your life. If the LESA runs out, you’ll be responsible for paying the taxes and insurance again.