Does Your Mortgage Getting Sold Affect Your Credit?

Mortgage servicing transfers can be a source of confusion and concern for many homeowners. Understanding whether such a transfer impacts your credit is a common question, given the importance of a healthy credit profile. This article aims to clarify if a mortgage being sold affects your credit score and outlines important steps homeowners should consider during this process.

Understanding Mortgage Servicing Transfers

When a mortgage is “sold,” it typically refers to the transfer of the loan’s servicing rights, not the ownership of the debt itself. The original lender often sells the mortgage note, which represents the actual debt, to an investor in the secondary market, such as Fannie Mae or Freddie Mac. The right to collect monthly payments and manage the loan account is then transferred to a new company, the mortgage servicer. Mortgage servicers handle administrative aspects like processing payments, managing escrow accounts for taxes and insurance, and communicating with borrowers. Transfers occur for various reasons, such as operational efficiency, changes in business strategy, or a lender selling a portfolio of servicing rights. The company owning the mortgage note (the investor) and the company servicing it (the servicer) are often different.

Impact on Your Credit Score

A mortgage servicing transfer does not directly impact a borrower’s credit score. The fundamental terms of your loan, including interest rate, principal balance, and payment history, remain unchanged during a servicing transfer. These are the elements credit bureaus primarily consider. The loan account number reported to credit bureaus generally stays the same, reflecting a continuous payment history. Credit scores are determined by several factors, such as payment history, the amount of debt owed, the length of credit history, and the types of credit used. A change in the entity collecting payments does not alter these underlying characteristics. Your payment behavior influences your score, not the specific company receiving funds. As long as payments are made on time and according to original terms, the transfer itself will not negatively affect your credit standing.

Steps to Take After a Transfer

While a direct impact on your credit score is unlikely, taking proactive steps after a mortgage servicing transfer ensures a smooth transition and prevents potential issues.

Upon notification of a transfer, homeowners should:

• Verify the new servicer’s information, including contact details and payment address. Federal law, the Real Estate Settlement Procedures Act (RESPA), requires both the old and new servicers to send a “Notice of Transfer of Loan Servicing” letter.
• Update any automatic payment arrangements set up with your previous servicer. This means canceling the old automatic payment and establishing a new one with the incoming servicer to avoid missed payments.
• Carefully review statements from the new servicer to confirm all loan details, including principal balance and escrow account information, are accurate.
• Maintain records of all correspondence related to the transfer, including official transfer notices.
• Understand the 60-day grace period. Federal law provides this period following a servicing transfer, during which a payment made to the previous servicer cannot be treated as late. This protection helps prevent late fees or negative credit reporting due to confusion during the transition period. Even with this grace period, promptly confirming payment receipt with the new servicer can provide additional assurance.