Servicing a Loan

Once the loan has been originated, the lender is required to service the loan.

Servicing the loan includes collecting the mortgage payment and sending it to the secondary mortgage market; sending a monthly statement to the borrower; providing a contact number for the borrower's questions and escrow instructions for taxes and insurance; accepting additional payments applied to the principal; and computing the payoff, should the borrower request it.

Lenders make their money from finance charges and reoccurring income‚Ä®. Finance charges include origination fees and discount points.

The reoccurring income is the interest collected on the loan.

An origination fee is a fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. Discount points increase the lender's yield. A point is equal to one percent of the loan amount.