Memphis, TN asked in Banking, Consumer Law and Contracts for Tennessee

Q: If I sign a bank loan application and it states we intend to service your loan am I to understand I am approved?

2 Lawyer Answers
Adam Savett
Adam Savett
  • Consumer Law Lawyer
  • Allentown, PA

A: It likely does not mean that. Don't worry, it doesn't mean you weren't approved either.

You see there are different parts of a loan - origination and servicing.

Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application.

Loan servicing is the process by which a company collects interest, principal, and/or escrow payments from a borrower. Another way to look at it is that loan servicing covers essentially everything after disbursement of the funds until the loan is fully paid off.

In the United States, the vast majority of mortgages are backed by the government or government-sponsored entities (GSEs) through purchase by Fannie Mae, Freddie Mac, or Ginnie Mae. Because GSEs and private loan investors typically do NOT service the mortgage loans that they purchase, the bank who sells the mortgage will generally retain the right to service the mortgage pursuant to a master servicing agreement. That is likely what the statement referred to.

Good luck.

Mr. James Charles Wright
Mr. James Charles Wright
  • Business Law Lawyer
  • Knoxville, TN
  • Licensed in Tennessee

A: No. I agree with the response that came earlier. The bank will go through a review process. You should stay in contact with your lender as to the process and timing. Lenders are incredibly busy these days in light of interest rates and other economic factors.

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