Glossary · OPERATIONS

Note Servicing

Professional management of a loan's payment collection, ledgering, escrow, and year-end tax reporting by a licensed third party.

A note servicer (loan servicer) handles all administrative functions of a private promissory note: collecting monthly payments from the borrower, applying to principal and interest per the amortization schedule, disbursing to the lender (seller), maintaining escrow for taxes and insurance, issuing IRS Form 1098 to the borrower and 1099-INT to the lender, and maintaining the official payment history. Costs range from $15-$30/month. Using a professional servicer protects both parties by creating a neutral, authoritative record and eliminating the awkward dynamic of paying an individual directly. Major private note servicers include Note Servicing Center, FCI Lender Services, and Allied Servicing.

Related Terms

Amortization

The schedule by which a loan principal is paid down over time, with each payment split between inter

Escrow

A neutral third-party account that holds funds or documents until specified conditions are met.

Promissory Note

A signed legal document in which the borrower promises to repay a specific amount under defined term

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

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