While sorting through your mail, you open a letter that explains the company you financed your mortgage through—the lender—is selling your loan to another company and in a month it will be financed through a new company. Wait, what? Can they do that?
The simple answer is, yes, and it happens more often than you may think. If you have a 30-year loan, you can expect it to change hands one to three times over the course of the 30-year period. Lenders can sell your loan and they often do so to make money off the sale, replace funds used to make the loan and improve their liquidity, reduce liabilities or balance their portfolio.
The fact that your lender sold your mortgage doesn’t mean you should panic or that the conditions, interest rate or balance of your loan will change.
“The mortgage note can never change with the sale of servicing of a loan,” said Laine Buquoi, Vice President and Mortgage Loan Officer with America’s Mortgage Resource in Metairie, Louisiana.
What to do if your mortgage changes hands
When you get your new mortgage paperwork, you will want to take action to line up your mortgage payments and escrow to make sure they go to the right place. Here are five steps you will want to take:
1. Review it to make sure your information is accurate. If you find any discrepancies, contact the new lender or servicer to make sure they have the correct information
2. Confirm your former method of payment is set up so the new lender or servicer receives payment on time
3. Make sure the new servicer has a copy of the declarations page from your insurance policy
4. Contact your insurance agency to let them know about the change to ensure your Homeowners insurance remains in place and you do not end up without coverage or with Force Placed insurance, which usually costs more than the insurance you purchase on the market. Brightway customers should complete this online form to provide the name of the new mortgage holder, your mailing address and the loan number.
5. Contact your new lender or servicer a week or two after making your first payment to make sure they received your payment
“Typically the new servicer will contact the insurance agency and let them know that they are the new servicer, and the insurer should change the mortgagee clause on the insurance policy, but 5% of the time it can get quirky to where some information lags behind,” said Buquoi. “If you do get notification that your loan is being sold to a new lender or servicer, double check to be sure that they do not need additional information from you and that they have the correct address, your phone number and your email address so that you can stay in communication and vice versa with the new servicer.”
While the lender and the company that manages your loan, payments and communications—the servicer—can be the same company, that is often not the case. In fact, your mortgage company may sell your loan to the servicer.
Buquoi said is takes a lot of manpower to service loans, which is why more and more lenders are selling loans to servicers. She also shared that loans are often sold in bundles.
“In most cases, the lender has the transaction to get you through the purchase, and the loan will be sold to a servicer,” said Buquoi.
“Once you close the transaction, you are no longer doing business with the lender. You are doing business with the servicer,” she continued.
Your servicer changes
If your loan servicer changes, you can expect the new and old servicers to notify you of the change. If you receive a transfer of sale notice from a new servicer but nothing from your current servicer, contact your current servicer to confirm the transfer before making payment. This will ensure the change is legit and you are not being scammed.
According to the Federal Trade Commission, the notices from your current and new servicers must provide the following information:
• Name and address of the new servicer
• Date the current servicer will stop accepting your mortgage payments
• Date the new servicer will begin accepting your mortgage payments
• Telephone numbers for the current and new mortgage servicer, for information about the transfer
• Whether you can continue any optional insurance, such as credit life or disability insurance; what action you must take to maintain coverage; and whether the insurance terms will change
• Statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account
• Statement explaining your rights and what to do if you have a question or complaint about the servicing of your loan
You will need to set up payment to go through your new services provider. The good news is that you have a 60-day grace period after the transfer, which means the new servicer cannot charge you a late fee if you mistakenly send your mortgage payment to the old servicer.
“Ninety-five percent of the time the loans transfer with ease and the information is transferred over to the new servicer,” she added. “So, it’s not as if you’ve got to go on warning, but at the same time you want to double check and make sure that the new servicer has all of the correct information.”
Your lender changes
If your lender sells your loan, the new owner must give notice and provide the following information:
• Name, address and telephone number of the new owner of the loan
• Date the new owner takes possession of the loan
• Person authorized to receive legal notices and who can resolve issues about loan payments
• Where the transfer of ownership is recorded
Within 30 days of taking ownership of your loan, your new lender must notify you of the change and provide the aforementioned information. This will be in addition to any notices you may receive from the servicers.
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