How and when will my mortgage lender notify me if it transfers my loan?

Question

Several months ago, I took out a mortgage loan with a particular lender. I thought that lender would keep the loan until I paid it off or sold my house. But I just heard from one of the employees that they might transfer it to a different bank.

I'm worried I might accidentally send my monthly mortgage payment to the wrong place, putting me behind, and I'll have to pay late fees. How will I find out if my mortgage loan gets transferred?

Answer

If the lender transfers either the mortgage loan itself or the rights to service the loan (explained in more detail below), you'll receive notice about the transfer in the mail.

Understanding Mortgage Loan Transfers and Servicing Transfers

After you take out your mortgage loan, it's likely that the original lender will eventually:

• sell the loan to a new owner, called a "holder" or "investor," or
• transfer the servicing of your loan to a new servicer, which means the right to manage the loan is transferred.

Mortgage loans and the rights to service them are frequently bought and sold between banks and investors.

How Loans Transfer Between Different Owners

After your mortgage lender gives you a home loan, it might sell that loan to a new owner. If your lender sells your mortgage loan, the new owner must, by law, notify you.

Loan Ownership Transfer Notices

If your current lender transfers ownership of your loan to a new owner, the new owner must send you a notice no later than 30 days after the date of the transfer. The notice must include, among other things, the name, address, and telephone number of the new loan owner.

This notice is in addition to any notices you might receive about the transfer of servicing rights for your loan.

How Servicing Transfers Work

Again, servicing transfers are very common in the loan industry. When you take out a mortgage loan, it's likely that the lender will transfer your loan servicing to a new servicer sometime down the line.

What Is a Mortgage Servicer?

Mortgage servicers process loan payments and manage the loan account on behalf of the loan holder. The servicer is the company to which you make your payment. Sometimes, the owner of the loan will also service it. But often, the servicer doesn't own the loan.

Servicing Rights in the Mortgage Industry

Again, the owner of the loan might service it. Or the mortgage loan owner might sell the rights to service the loan to a different company. Or the owner of the servicing rights might hire a vendor, called a "subservicer," to take on the servicing duties, rather than servicing the loan itself.

Transfer of Servicing Rights Notices

If the right to service your mortgage loan is transferred to a new servicer, you'll generally get two notices:

• a notice from your current mortgage servicer at least 15 days before the effective transfer date, and
• a notice from the new servicer not more than 15 days after the effective date of the transfer.

The current servicer and the new servicer may send a single notice, in which case it must be provided to you at least 15 days before the servicing transfer date.

The notice(s) will include, among other things:

• the date on which the transferring servicer will stop accepting payments on the loan and
• the date on which the new servicer will begin to accept payments.

In addition, you get a 60-day grace period after the transfer. So, the new servicer can't consider your payment late or charge you a late fee if you mistakenly send your mortgage payment to the old servicer during this time as long as the old servicer receives the payment before the due date, including any grace period allowed under the mortgage contract.

Getting Help

Contact a foreclosure attorney if you're facing a potential foreclosure because of problems with a loan or servicing transfer.