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Once the loan has been originated, the lender is required to service the loan.
Servicing the loan includes collecting the mortgage payment and sending it to the secondary mortgage market; sending a monthly statement to the borrower; providing a contact number for the borrower's questions and escrow instructions for taxes and insurance; accepting additional payments applied to the principal; and computing the payoff, should the borrower request it.
Lenders make their money from finance charges and reoccurring income
. Finance charges include origination fees and discount points.
The reoccurring income is the interest collected on the loan.
An origination fee is a fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. Discount points increase the lender's yield. A point is equal to one percent of the loan amount.