INVESTOPEDIA EXPLAINS 'LOAN SERVICING'

Loan servicers are compensated by retaining a relatively small percentage of each periodic loan payment known as the servicing fee or servicing strip. This is usually 0.25% to 0.5% of the periodic interest payment. For example, if the outstanding balance on a mortgage is $100,000 and the servicing fee is 0.25%, the servicer is entitled to retain ((.0025 / 12) x 100,000) = $20 of the next period payment before passing the remaining amount to the note holder. Read more: http://www.investopedia.com/terms/l/loan_servicing.asp#ixzz3Wcxi84Zr Follow us: @Investopedia on Twitter

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