What Can You Do If Your Mortgage Is Sold to a Bad Company?

Receiving notification that your mortgage servicer has changed can be unsettling, especially if the new company’s reputation raises concerns. The sale or transfer of loan servicing rights is a common, routine business practice for lenders to free up capital, reduce risk, or generate revenue. Your mortgage itself, including its terms, remains unchanged. Your rights as a borrower are protected by federal law, providing a framework for navigating these transitions.

Understanding Mortgage Servicing Transfers

Mortgage servicing transfers occur for various reasons within the financial landscape. Lenders often sell servicing rights to free up funds, allowing them to issue new mortgages and maintain liquidity. This practice also helps lenders manage risk and rebalance their loan portfolios. Your loan may be sold multiple times throughout its life, as it is considered a financial asset that can be traded on the secondary market.

When a mortgage servicing transfer happens, both your original (transferor) and new (transferee) servicers are required to send you notifications. The original servicer must send a “goodbye letter” at least 15 days before the effective transfer date, and the new servicer must send a “welcome letter” within 15 days after the transfer’s effective date. These notices should contain specific information, including the new servicer’s name, address, and contact information, the effective date of the transfer, and instructions on where to send payments.

Your Rights and Protections

Federal law provides specific protections for borrowers during and after a mortgage servicing transfer. The Real Estate Settlement Procedures Act (RESPA) is a primary regulation governing these transfers, ensuring borrowers receive timely disclosures and fair treatment. Under RESPA, if you accidentally send your payment to the old servicer instead of the new one during the 60-day period beginning on the transfer’s effective date, the new servicer cannot treat your payment as late or impose late fees. Furthermore, they cannot report this payment as late to a credit bureau.

Your servicer has obligations regarding the timely application of payments and the proper handling of your escrow account. The terms of your original loan agreement, including the interest rate and maturity date, remain in effect despite the transfer.

Addressing Issues and Errors

If you encounter issues or believe your new servicer has made an error, you can send a Qualified Written Request (QWR) or a Notice of Error (NOE) to your mortgage servicer. These formal written communications are effective tools for requesting information or asserting an error. To be valid, a QWR or NOE must be in writing, include your name, account information, and a clear description of the issue. Send these requests to the specific address designated by the servicer for error resolution, which may differ from the payment address.

Upon receiving a QWR or NOE, the servicer must acknowledge its receipt within five business days. They are then required to investigate and respond within 30 business days. For notices of error, the servicer must either correct the error and notify you, or explain why no error occurred. Maintaining meticulous records of all communications, including dates, times, names, and copies of all sent and received documents, along with proof of mailing, is important. When communicating by phone, always follow up with written confirmation of the discussion.

Seeking External Assistance

If direct resolution with your servicer proves unsuccessful, several external resources can provide assistance. The Consumer Financial Protection Bureau (CFPB) plays a role in overseeing mortgage servicers and handling consumer complaints. You can file a complaint with the CFPB through their website or by phone, providing detailed information about the problem and any steps you have already taken. The CFPB will forward your complaint to the company, which typically responds within 15 days, with a final response usually provided within 60 days.

Additionally, state regulatory agencies, such as state banking departments or financial regulation divisions, often have authority over mortgage companies and servicers operating within their jurisdiction. These agencies can investigate complaints and enforce compliance with state and federal regulations. For free or low-cost advice and assistance, HUD-approved housing counselors are available nationwide. These counselors are trained to help borrowers understand their options, negotiate with servicers, and navigate complex mortgage issues. In cases involving persistent or complex legal disputes, consulting with legal aid services or a private attorney specializing in real estate or consumer law may be appropriate.