Auto-Pay

Auto-pay is an arrangement where a borrower authorizes their loan servicer to automatically draft the monthly mortgage payment from a designated bank account via ACH on a scheduled date. For note investors, auto-pay enrollment is a strong positive indicator — borrowers who set up automatic payments are significantly less likely to fall behind, and the arrangement reduces the servicer's collection workload by eliminating the need for monthly billing reminders and follow-up on late payments.

In the secondary mortgage note market, auto-pay status is particularly meaningful when evaluating performing loans or re-performing loans. A borrower who has been on auto-pay for several consecutive months demonstrates payment consistency that goes beyond simply being current — it signals that the borrower has both the intent and the cash flow to sustain payments. When structuring a loan modification or forbearance agreement, setting up auto-pay as part of the new terms helps reduce re-default risk and gives the investor greater confidence in projected cash flows.