It has become increasingly unlikely that a borrower will make loan payments to the same lender during the borrower’s loan term. Mortgages (particularly fixed rate loans) are regularly sold in the secondary market.
When a lender is identified as the “loan servicer” it means that the lender is sending mortgage statements, collecting the monthly payments, managing impound accounts and performing other loan management activities. A lender receives a payment from the secondary market (most notably Fannie Mae or Freddie Mac) for performing such servicing activities.
“Selling the loan” typically means that the current lender, to whom you have been making your payments, has sold the servicing rights to the loan. By selling the loan, lenders acquire funds with which to make additional loans, thereby keeping the money circulating in the market place. These transfers, which can occur any time during the life of a loan, have become big business for lenders.
For the borrower, the sale of their loan merely means that they will make their payments to another company. It may never happen to your loan or, on the other hand, your loan might be sold several times during its term. If your loan is sold, it is important to know that you have specific rights and can expect certain notices to occur.
When you first acquired your mortgage, the lender was required to provide you information regarding the likelihood of your loan being sold to another investor. This “servicing notice” typically uses a percentage figure to identify the likelihood of a future sale. The guidelines governing loan sales are federally mandated, including the fact that once your loan is sold, you must hear from both the lender saying “goodbye” and the one saying “hello” to your mortgage. If you receive a notice to send payments to another source without having received a “goodbye” letter from your current lender, be sure to check that the assignment is legitimate. There have been bogus mortgage scams perpetrated upon unwitting consumers whose loans had not actually been sold but who were fooled into making monthly payments to a blind post office box. Only after receiving a delinquency notice from their true servicer did some consumers realize they had been deceived.
Be concerned if any of the following notices are not received. At least fifteen days before the date your next payment is due, the lender selling your loan must notify you in writing, provide you the name of the new company, its full address, a phone number (800# preferred), and the name of a contact person who can answer your questions.
The company purchasing your loan must send you the same information in the same time frame, complete with the name of a real person (not a voice mail system) that you can contact should you have questions. If you do not receive both the goodbye and hello letters, contact your current mortgage servicer for clarification.
The increased frequency of such transfers has resulted in buyers experiencing some problems, If trouble occurs, check first with your original lender who can usually assist you in your contact to the present lender. Some of the problems that can occur include:
– improper posting of payments, resulting in the unwarranted assessment of a late fee.
– disputes over changes in the escrow account/balances.
– Failure of the new servicer to pay taxes or insurance on time.
– delay in sending payment coupon books to the borrower.
– failure of the new servicer to respond to borrower inquiries.
– difficulty in reaching the new servicer by telephone.
The most exasperating problem can occur when the mortgage payment is sent (on time) to the old loan servicer resulting in a late fee being assessed. Federal guidelines now prohibit your loan from being termed “delinquent” for a period of sixty days during the servicing transfer. If you are inappropriately assessed a late fee, be sure to clarify the situation immediately and have it waived, in writing.
If you’d like more information, an excellent free booklet is available entitled “When Your Loan is Transferred to Another Lender”. Contact the Mortgage Bankers Association of America, 1125 Fifteenth Street, NW., Washington, DC 20005.