Mortgage Loan Transfer Guide
Key Takeaways
- The company that collects your monthly payment can change more than once over the life of the loan, because it is common for servicing rights to be sold, usually as a bundle of several loans, and the sale can come immediately after closing or years later. A new servicer takes over the management of the whole loan, the payments, the escrow account, the insurance and the tax bills, while the original terms of your mortgage stay as they were written.
- Watch for two letters, not one, because notice comes from both the old servicer and the new one, and although your current servicer does not have to ask permission before transferring servicing, it must send you written notice at least 15 days before the effective transfer date. If only the new servicer writes, call the original company to confirm, and keep your mailing address current with whoever is servicing the loan, which matters when you use a PO Box or carry a mortgage on a second home.
- Once both letters have arrived, or you have called the old company yourself and confirmed the servicing really was transferred, every payment from that point forward belongs with the new servicer, and both notices name the date the old company stops taking payments and the date the new one starts. Although a 60-day grace period keeps a late fee off an on-time payment that still goes to the old servicer, the monthly payments themselves have to continue without interruption.
- You are not finished once the notices arrive, because although the old servicer is the one that notifies your insurance company and tax authority, following up with either is how you keep a bill from going to the wrong servicer. Those notices must also say that the transfer changes no term of your mortgage, the example given here being that where your contract already allowed you to pay property taxes and insurance premiums yourself, the new servicer cannot require an escrow account.
Your monthly mortgage payment is paid to what’s called a mortgage servicer. Sometimes it is the company that you originally called to get the mortgage. Other times, it’s a new company that’s taken over since the transfer of your loan. It is common for a loan to be transferred in the mortgage industry. And you can feel confident that if it happens, you will receive the necessary communications to keep you updated on who oversees it and who to send payments to.
About the home loan transfer process
There are a lot of things to consider when going through a home loan transfer. Whether your home loan is through a mortgage company or a bank, the transferring process is usually a bundle of several loans. Servicing means the collection of payments and management of operational procedures related to mortgages. In turn, when your mortgage loan is sold to a new lender, they will handle the management of your entire loan, including payments, escrow accounts, insurance, and taxes. The selling or transfer can take place immediately after closing of your home loan or years later. And this can happen several times throughout the life of your mortgage loan.
Do your mortgage terms change?
The transfer of service does not change the original terms of your mortgage loan. Although your current lender does not have to ask your permission to transfer servicing, they must notify you in writing within 15 days before the effective transfer. The borrower must continue monthly mortgage payments throughout the transition of servicers.
You will receive notification from both your old and new servicers. Both notices must include:
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new servicer’s name and address
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the date the current servicer will stop accepting your mortgage payments
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the date the new servicer will begin accepting your mortgage payments
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contact info for the current and new mortgage servicer
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whether you can continue any optional insurance, such as credit life or disability insurance; what action you must take to maintain coverage; and whether the insurance terms will change
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a statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.
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a statement explaining your rights and what to do if you have a question or complaint about your loan servicing.
If you receive only a letter from the new servicer, be sure to call your original servicer to verify that your loan has been transferred. And, don’t forget to keep your servicer informed of your current mailing address (in the event you have a PO Box or the loan that’s being transferred is a second home’s mortgage), so you receive all relevant correspondence.
Who receives your next mortgage payment?
If you have received both letters or have verified the mortgage loan transfer with your old servicer, be sure to send all payments from that point on to your new servicer. Sending your payment to the old servicer runs the risk of delayed payment. Though, there is a 60-day grace period where you will not receive a late fee if you paid the wrong mortgage servicer.
What happens to your escrow?
Your old mortgage servicer will inform the insurance company and your tax authority of the home loan transfer. Ensure the bill is not sent to the wrong servicer by following up with the insurance company or tax authority.
Who sends your annual tax statement?
In most cases, you will receive your tax statement from your current lender. But, there are instances when you may receive a statement from all lenders who carried your loan for that tax year.
