What does the term "servicing" refer to in mortgage finance?

In mortgage finance, the term "servicing" primarily refers to the management of mortgage loans. This encompasses a variety of tasks that are essential to overseeing a loan after it has been originated. Tasks include collecting monthly mortgage payments from borrowers, ensuring those payments are properly applied to the loan, managing escrow accounts for property taxes and insurance, providing timely account statements, handling customer service inquiries, and managing the loan's status (including any defaults).

Servicing is critical because it ensures that the loan is maintained correctly over its duration, thereby protecting the interests of both the borrower and the lender. Effective servicing also involves keeping track of payment schedules and providing borrowers with necessary information regarding their loans. By focusing on the management of mortgage loans, servicing plays a pivotal role in the overall mortgage process and impacts the financial stability of both the borrower and the mortgage holder.