What does loan servicing involve?

Loan servicing encompasses the comprehensive management of a loan after it has been disbursed to the borrower. This process includes several key activities like collecting monthly payments, managing escrow accounts for property taxes and insurance, providing customer service to borrowers, and handling delinquencies and defaults if they arise.

The significance of loan servicing lies in its role in ensuring that the loan is paid back under the agreed terms, maintaining communication with the borrower, and managing the overall lifecycle of the loan. Effective loan servicing contributes to the lender's ability to track account status and provide necessary support to borrowers, facilitating a smooth repayment process and addressing any arising issues.

In contrast, other options like collecting loan applications, closing transactions, or determining loan eligibility describe distinct stages in the mortgage lending process, not the ongoing management after the loan has been approved and disbursed. Understanding that loan servicing is about maintaining the health and adherence to the loan agreement highlights why the correct choice focuses on the management aspect after disbursement.