Who services loans in the secondary mortgage market?

In the secondary mortgage market, loans are typically serviced by a secondary lender or servicer. After the original lender has originated a mortgage, they often sell the loan to a secondary market institution. This secondary lender or servicer takes on the responsibility of managing the loan, which includes collecting payments, managing escrow accounts, and handling any customer service inquiries from borrowers.

Secondary lenders and servicers play a crucial role in the secondary mortgage market as they enable the flow of capital among investors and provide stability and liquidity to the mortgage market. By outsourcing loan servicing to these entities, original lenders can focus on providing new loans, while the secondary lenders ensure that existing loans are managed efficiently.

The original lender does not continue to service loans once they are sold in the secondary market, and borrowers typically do not deal with their loans directly for servicing purposes; they make payments to the servicer instead. While government entities may sometimes be involved in creating standards or backing loans, they do not typically service loans directly. This makes secondary lender or servicer involvement essential in the functioning of the secondary mortgage market.