Why Was My Mortgage Transferred to a New Servicer?

It is common for a mortgage to be transferred from one company to another during the life of the loan. This process, known as a mortgage servicing transfer, can sometimes cause confusion or concern for borrowers. Understanding why these transfers occur and what to expect can help demystify the experience. While the company you send your payments to may change, the fundamental terms of your mortgage agreement remain consistent.

Reasons for Mortgage Transfer

Mortgage servicing transfers happen because the original lender sells the rights to collect your monthly payments to another financial institution. This sale of servicing rights is a frequent occurrence, allowing lenders to manage their portfolios and free up capital. The original lender originates the loan but often does not wish to handle the ongoing administrative tasks associated with collecting payments and managing escrow accounts.

A mortgage transfer can also occur due to a merger or acquisition involving financial institutions. When one bank or mortgage company acquires another, the loans serviced by the acquired entity are integrated into the acquiring company’s portfolio. The sale of an entire loan portfolio also results in a transfer.

What to Expect After a Mortgage Transfer

Following a mortgage transfer, borrowers will receive official notifications from both their current and new mortgage servicers. These notices arrive within a 15-day window before the effective date of the transfer, ensuring borrowers have adequate time to prepare. The communication from the transferring servicer will confirm the upcoming change, while the notice from the new servicer will provide detailed instructions on where and how to send future payments.

The notifications will include the new servicer’s contact information, such as their address for payments, customer service phone numbers, and website details. Borrowers may find their account number has changed, requiring updates to any automated payment setups. Information regarding the handling of existing escrow accounts for property taxes and insurance premiums will also be provided, assuring continuity. The new servicer assumes responsibility for managing these funds.

Borrower Rights and Protections

Federal law provides specific protections for borrowers during a mortgage servicing transfer. The Real Estate Settlement Procedures Act (RESPA) mandates that both the transferring and new servicers provide timely notice of the transfer. This requirement ensures borrowers are adequately informed about changes to their payment instructions and servicer contact information.

RESPA also includes a 60-day grace period following the effective date of the transfer. During this period, if a borrower mistakenly sends a mortgage payment to the old servicer, the new servicer cannot treat that payment as late or impose late fees. This protection helps prevent penalties during the transition, allowing borrowers time to adjust to the new payment instructions.

Actions to Take After a Transfer

Upon receiving notification of a mortgage transfer, it is advisable to verify the legitimacy of the new servicer. You can do this by contacting your original servicer using a known and trusted phone number or by checking the new servicer’s credentials with reputable financial regulatory bodies. Confirming the transfer with both parties can help prevent potential scams and ensure your payments are directed correctly.

The next step involves updating your payment methods to reflect the new servicer’s details. If you use online bill pay or have automatic withdrawals, these will need to be adjusted to the new account number and payment address. Carefully review the first statement received from the new servicer for accuracy, paying close attention to the principal balance, interest rate, and any amounts held in escrow. Maintain detailed records of all communications, payment confirmations, and correspondence related to the transfer.