Mortgage Servicing

Sep 5, 2023

Mortgage servicing transfers refer to the sale or transfer of the rights to service a mortgage loan from one entity (the current servicer) to another (the new servicer). The "servicing" of a mortgage involves collecting monthly payments from borrowers, managing escrow accounts, handling customer service inquiries, and managing other aspects of the loan after it's been originated.

Here are some key points to understand about mortgage servicing transfers:

  1. Common Practice: It's not uncommon for the servicing rights of a mortgage to be sold multiple times during the life of the loan. This means that even if you take out a mortgage with one company, you might end up sending your monthly payments to a different company later on.

  2. Notification: When a mortgage servicing transfer occurs, both the current servicer and the new servicer are required to notify the borrower in writing. This ensures that the borrower knows where to send payments and whom to contact for customer service.

  3. Grace Period: There is typically a 60-day grace period after the transfer where late fees can't be charged if the borrower mistakenly sends the mortgage payment to the old servicer.

  4. No Impact on Loan Terms: The terms and conditions of the original mortgage loan agreement remain unchanged during a servicing transfer. Only the entity responsible for managing and collecting on the loan changes.

  5. Reasons for Transfer: There are various reasons why servicing rights are sold. Some lenders specialize in originating loans but don't want to handle the long-term servicing. Others might sell servicing rights to raise capital or manage their balance sheets.

  6. Regulations: Many countries regulate mortgage servicing to protect consumers. They usually set forth requirements for how these transfers should be handled to ensure borrowers are informed and not harmed by the process.

If you have a mortgage and receive a notice about a servicing transfer, it's essential to read all the information provided, update your records with the new servicer's contact details, and ensure you send your payments to the correct place. If you have questions or concerns, reach out to the new servicer for clarification.

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