Can You Stop Your Mortgage From Being Sold?
Navigate the reality of your mortgage being sold. Learn what to expect, your entitlements, and how to manage the transition smoothly.
When you secure a mortgage, it represents a long-term debt obligation tied to your home. While you might assume your initial lender will remain involved, mortgages are routinely bought and sold within the financial industry.
Understanding Mortgage Transfers
Mortgage transfers are a fundamental aspect of the financial system, allowing lenders to manage capital and offer new loans. Lenders frequently sell originated mortgages to free up funds, enabling them to extend credit to more borrowers. This process contributes to the liquidity of the housing and financing markets, often involving the secondary mortgage market where loans are bundled into securities and sold to investors.
The sale of the mortgage loan itself, which represents the debt, differs from the transfer of mortgage servicing rights. Servicing rights involve administrative tasks like collecting payments, managing escrow accounts, and handling customer inquiries. Even if your loan is sold, the original terms, including the interest rate, principal balance, and repayment schedule, remain unchanged.
What Happens When Your Mortgage Is Transferred
When a mortgage loan or its servicing rights are transferred, borrowers experience a shift in how they manage their loan. Both the old and new servicers must provide written notification of the transfer. The old servicer typically sends a notice at least 15 days before the effective date, and the new servicer sends one no more than 15 days after.
These notices must contain specific information, including the new servicer’s name, address, and toll-free telephone numbers. They also specify the effective date of the transfer and the date the new servicer will begin accepting payments. In some instances, the old and new servicers may send a single, combined notice, which must also be provided at least 15 days before the transfer date. Borrowers should review these documents for updated payment instructions.
A grace period after a servicing transfer, typically 60 days, protects borrowers. During this period, if a payment is mistakenly sent to the old servicer, the new servicer cannot charge late fees or report the payment as delinquent to credit bureaus. This grace period helps prevent penalties during the transition as borrowers adjust to new payment arrangements.
Your Rights and Protections
Federal regulations provide specific rights and protections for borrowers when their mortgage is transferred. The Real Estate Settlement Procedures Act (RESPA) is a primary federal law governing these transfers, ensuring transparency in the mortgage process. RESPA mandates timely and accurate notification of servicing transfers to borrowers.
Under RESPA, borrowers have the right to receive a servicing transfer statement that details the change in servicer. This statement must include the effective date of the transfer, the new servicer’s contact information, and a confirmation that the transfer does not alter the core terms of the mortgage loan. These disclosures ensure borrowers are informed about where to send payments and who to contact for account inquiries.
The 60-day grace period for misdirected payments prevents late fees or negative credit reporting if payments are sent to the former servicer during this transition. Borrowers also have the right to request information about their loan and dispute errors with their servicer. The servicer must acknowledge a written notice of error within five business days and investigate and respond.
Addressing Concerns After a Transfer
If issues arise after a mortgage transfer, borrowers can take steps to address their concerns. The first step involves communicating directly with the new servicer, in writing. Sending written notices for inquiries or error resolution triggers specific servicer obligations under federal law.
Borrowers should keep meticulous records of all correspondence, including dates, names of representatives, and copies of documents sent and received. This documentation is important for escalation. Mortgage servicers are required to follow formal error resolution procedures for written disputes, acknowledging receipt of the notice of error within five business days and investigating the claim. The servicer must then provide a written response within 30 business days, either correcting the error or explaining why no error occurred.
If issues are not resolved satisfactorily with the servicer, borrowers can escalate their concerns to federal consumer protection agencies. The Consumer Financial Protection Bureau (CFPB) accepts complaints regarding mortgage servicing, including issues related to transfers, payment application, and error resolution. Filing a complaint with the CFPB can prompt an investigation and facilitate a resolution.