What Happens When Your Mortgage Is Sold to Another Company?
Navigate the common event of a mortgage sale with confidence. Understand what changes, what doesn't, and your essential steps for a smooth transition.
The sale of a mortgage is a routine and legal aspect of the mortgage industry. Lenders often sell mortgages to free up capital, allowing them to issue new loans. This process frequently involves the sale of servicing rights rather than the loan itself. This article clarifies what borrowers can expect when their mortgage is sold, covering notifications, impact on loan terms, payment adjustments, and borrower protections.
Understanding the Mortgage Sale Notification
Borrowers are legally entitled to receive specific notifications when their mortgage servicing rights are transferred. The Real Estate Settlement Procedures Act (RESPA) mandates that both the old and new servicers provide a notice of transfer. This notice must be sent at least 15 days before the effective date of the transfer.
The notice must include specific details. It states the effective date of the transfer, along with the names, addresses, and toll-free telephone numbers for both the old and new servicers. The notice also specifies the date when the old servicer will stop accepting payments and when the new servicer will begin accepting them. It is important to carefully review these documents for accuracy, ensuring all personal and loan information is correct.
Impact on Your Loan Terms and Servicing
When your mortgage is sold, your interest rate, loan balance, and repayment schedule generally remain unchanged from your original agreement. The only aspect that typically changes is the company responsible for managing your loan.
It is important to distinguish between the owner of your loan and the loan servicer. The original lender or a subsequent investor owns your mortgage, while the servicer is the entity that handles the administrative duties. These duties include collecting monthly payments, managing escrow accounts, and providing customer service. When a mortgage is sold, it is usually the servicing rights that are transferred, meaning a new company will take over these administrative responsibilities. The new servicer will then be responsible for sending out statements and addressing any inquiries you may have regarding your loan. This transition primarily affects where you send your payments and who you contact for assistance, not the core financial obligations of your mortgage.
Adjusting to New Payment and Escrow Management
Once a mortgage servicing transfer occurs, borrowers need to adjust their payment methods to the new servicer. The notification you receive will specify the date the new servicer begins accepting payments and provide their mailing address for checks, if applicable. If you use online banking or automatic payments, you will need to update the payee information to reflect the new servicer’s details and possibly their new online portal.
Federal law provides a 60-day grace period following the effective date of the transfer. During this period, if you mistakenly send your payment to the old servicer on or before the due date, that payment cannot be treated as late by the new servicer, and no late fees can be imposed. Regarding escrow accounts, the funds held for property taxes and insurance premiums are transferred from the old servicer to the new one. The new servicer will then assume responsibility for managing these payments on your behalf, ensuring your property taxes and insurance premiums are paid as they become due.
Borrower Protections and Key Steps
Federal regulations, particularly the Real Estate Settlement Procedures Act (RESPA), provide protections for borrowers during a mortgage servicing transfer. RESPA includes a provision that prohibits the new servicer from imposing late fees or reporting a payment as late if it was sent to the old servicer within the 60-day grace period following the transfer. This protection helps ensure borrowers are not penalized during the transition.
To safeguard your interests, take several proactive steps. Verify the legitimacy of the new servicer by cross-referencing information in the transfer notice with publicly available records. Update your contact information with the new servicer promptly and retain all correspondence related to the transfer, including the initial notices. Regularly monitor your mortgage statements for accuracy and keep a detailed record of all payments made. If you identify any errors or discrepancies, you can submit a Qualified Written Request (QWR) to your servicer. A QWR is a formal written communication that requires the servicer to acknowledge receipt within five business days and investigate and respond to your inquiry within 30 business days. This tool allows you to formally dispute inaccuracies or request specific information about your account.