Can I Change My Mortgage Loan Servicer?

It is common for the company that manages your mortgage loan to change over time. While you may initially work with the lender who provided your mortgage, a different entity, known as a mortgage loan servicer, often takes over the day-to-day administration of your loan. A mortgage servicer is responsible for collecting your monthly payments, managing escrow accounts for property taxes and insurance, tracking loan balances, and handling inquiries related to your mortgage. Understanding the role of a mortgage servicer and how these servicing rights can transfer is important for homeowners to navigate potential changes and manage their mortgage responsibilities effectively.

How Mortgage Servicing Changes

Mortgage servicing rights are frequently bought and sold between financial institutions. This transfer is typically initiated by the original lender or an investor, not by the borrower. Lenders may sell these rights to free up capital, allowing them to originate more loans, while the purchasing entity specializes in managing existing mortgages. This process is part of the secondary mortgage market, where mortgages are traded, sometimes bundled into mortgage-backed securities.

Federal law mandates specific notifications when mortgage servicing rights are transferred. Under the Real Estate Settlement Procedures Act (RESPA), both the transferor (old) servicer and the transferee (new) servicer must notify the borrower in writing of the change. The “Goodbye Letter” from the old servicer must be sent at least 15 days before the effective date of the transfer. Conversely, the “Welcome Letter” from the new servicer must be sent no more than 15 days after the effective date of the transfer.

These notifications provide details including the name, address, and toll-free telephone numbers for both servicers, the effective date of the transfer, and the date the new servicer will begin accepting payments. The notices also clarify that the transfer does not change the terms of your mortgage, such as the interest rate or loan term. This ensures borrowers are aware of who to pay and where to direct inquiries.

Borrower Steps After a Servicing Transfer

After receiving notification of a mortgage servicing transfer, borrowers should take steps for a smooth transition. First, carefully review both the “Goodbye Letter” from your old servicer and the “Welcome Letter” from your new servicer. Verify the new servicer’s contact information, including their mailing address for payments and customer service phone numbers.

Update any automatic payment arrangements you have. Do not assume these transfers are automatic, as manually updating payment settings is often necessary to prevent misdirected payments. If you have an escrow account for property taxes and insurance, confirm that the details have been accurately transferred and that the new servicer will continue to make these payments on your behalf.

Federal law provides a 60-day grace period. During this period, if you mistakenly send your mortgage payment to the old servicer, you cannot be charged a late fee, provided it was received by the old servicer before the due date. However, it is advisable to begin sending payments to the new servicer promptly to avoid delays. Maintaining thorough records of all communications, payments, and account statements during this transition period is also recommended.

Initiating a Servicer Change

Homeowners cannot directly choose or switch their mortgage servicer. The decision of who services a loan primarily rests with the lender or the entity that holds the mortgage servicing rights. While you select your mortgage lender when obtaining a loan, that lender often sells the servicing rights to another company, sometimes immediately after closing.

The most common way a borrower obtains a “new” servicer is by refinancing their mortgage with a new lender. When you refinance, you replace your existing mortgage with a new one, and the new lender (or their chosen servicer) will then service this new loan. However, refinancing solely to change servicers is not advisable, as there is no guarantee the new loan will not eventually be sold to another servicer.

Refinancing decisions should primarily be driven by financial benefits, such as securing a lower interest rate, changing the loan term, or accessing home equity. While a change in servicer can be a byproduct of refinancing, it should not be the sole motivation due to the costs associated with refinancing, such as closing costs.

Addressing Servicing Concerns

If you encounter issues or disputes with your current mortgage servicer, avenues exist for resolution without changing servicers. Federal regulations outline specific procedures for borrowers to address concerns. You can submit a “Notice of Error” or an “Information Request” to your servicer. These written communications should include your name, account number, and a clear description of the error or information you are seeking.

Upon receiving a Notice of Error, your servicer is required to acknowledge it within five business days and investigate the issue. They must either correct the error or provide a written explanation of why they believe the account is accurate, within 30 business days. For Information Requests, the servicer has 30 business days to respond. During the investigation of a Notice of Error, the servicer is prohibited from reporting negative information about the disputed payment to credit reporting agencies for 60 days.

If your servicer does not adequately resolve the concern, you can escalate the issue to regulatory bodies. The Consumer Financial Protection Bureau (CFPB) is a federal agency that supervises financial products and services, including mortgages, and accepts complaints from consumers. State regulatory agencies also oversee mortgage servicers and can be a resource for unresolved disputes.