What Are Your Rights When Your Mortgage Is Sold?
When your mortgage servicing changes, understand your protections and how to ensure your loan terms and payments are handled correctly.
While you might initially interact with one company for your loan, it is common for the administrative duties of managing that loan to be transferred to another company. This process, often referred to as your mortgage being “sold,” typically means that the right to service your loan—collect payments and manage your escrow account—is transferred, not that the terms of your actual loan agreement change. This practice is a standard part of the mortgage industry, allowing lenders to manage their portfolios efficiently. Understanding this common occurrence helps you navigate the process if it happens to your mortgage. This article explains what to expect and outlines your rights when your mortgage servicing is transferred.
Notification Requirements
When the servicing of your mortgage is transferred, federal regulations mandate that both your current servicer and the new servicer provide you with specific notifications. Your current servicer must send you a “Goodbye Letter” at least 15 days before the effective date of the transfer. This letter informs you that your servicing is being moved to a different company. It provides details about the new servicer and the date when they will begin accepting your payments.
The new servicer will also send you a “Welcome Letter” within 15 days after the effective date of the transfer. This notice confirms that they are now responsible for servicing your loan. Both notices are required to include the effective date of the transfer, the name and contact information for the new servicer, a toll-free or collect call telephone number, and the date when the new servicer will begin accepting your payments. These required notifications are designed to ensure you have ample time and information to adjust to the change and know precisely where to send your payments.
Impact on Mortgage Terms
A common concern among homeowners when their mortgage servicing is transferred is whether the fundamental terms of their loan will change. It is important to understand that the sale of your mortgage servicing rights does not alter the core contractual agreements of your loan. Your interest rate, whether fixed or adjustable, remains the same as originally agreed upon in your promissory note. The principal balance, the repayment schedule, and the overall loan type, such as a fixed-rate or adjustable-rate mortgage, are all preserved.
The new servicer is legally obligated to honor all the terms and conditions of your existing mortgage agreement. They cannot unilaterally change your monthly payment amount, except for adjustments related to escrow for taxes and insurance, or changes to an adjustable interest rate as stipulated in your original loan documents. Regarding escrow accounts, any funds you have accumulated for property taxes and homeowner’s insurance are transferred directly to the new servicer. These arrangements transfer, ensuring your tax and insurance payments continue to be made on your behalf without interruption.
Making Payments After a Sale
After receiving notification of a mortgage servicing transfer, understanding where and how to send your payments becomes a practical concern. The “Welcome Letter” from your new servicer will clearly state their address for payments and the methods they accept, which commonly include online portals, direct debit, or mail. It is advisable to update any automatic payment arrangements you have to ensure your payments are directed to the new servicer by the specified date.
Federal regulations provide a grace period to protect you during this transition. For 60 days following the effective date of the transfer, your new servicer cannot treat a payment as late or impose a late fee if you mistakenly send it to your old servicer. During this time, if you send a payment to the previous servicer, they are required to forward it to the new servicer. If you are unsure where to send your payment or encounter any difficulties, contact the new servicer immediately using the contact information provided in their welcome letter.
Protecting Your Rights
Federal regulations establish protections for consumers when mortgage servicing is transferred, ensuring homeowners have specific rights and avenues for recourse if issues arise. You have the right to request information about your loan from your servicer, and they are required to respond to written inquiries within 30 business days. This right extends to disputing errors on your account or requesting details about payment application or escrow balances.
If you believe your rights have been violated or cannot resolve a problem directly with your new servicer, several steps are available. You can submit a written complaint to your servicer. If the issue remains unresolved, you can file a complaint with regulatory bodies such as the Consumer Financial Protection Bureau (CFPB). The CFPB oversees mortgage servicers and investigates complaints to ensure compliance with federal consumer protection laws. State-level agencies may also offer assistance or have their own complaint resolution processes for mortgage-related issues.