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 certain bank. I thought that bank 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, which would put me behind and I'll have to pay late fees. How will I find out if my mortgage loan gets transferred?

Answer

If the bank transfers either the mortgage loan itself or the rights to service the loan (this is explained in more detail below), you will receive notice about the transfer in the mail.

Understanding Mortgage Loan Transfers and Servicing Transfers

After you take out your mortgage loan, it is likely that the original lender will eventually sell the loan to a new owner—called a holder or investor—and/or transfer the servicing of your loan to a new servicer, which means the right to manage the loan is transferred.

What's a mortgage servicer? Mortgage servicers process loan payments and manage the loan account on behalf of the holder of the loan. The servicer is the company that you make your payment to. Sometimes the owner of the loan will also service it, but often the servicer is not the owner of the loan.

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

Loan Ownership Transfers

If your current bank 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 owner of the loan. (To learn more, see What Happens If My Mortgage Is Sold to a New Owner?)

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

Transfer of Servicing Rights

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. This means 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, so long as the old servicer receives the payment before the due date (including any grace period allowed under the mortgage contract). (If you already sent a payment to the old servicer and want to learn more, see I just found out my mortgage servicer changed, but I sent my payment to the old servicer. What now?)

Getting Help

If you're facing a potential foreclosure because of problems with a loan transfer or servicing transfer, contact a foreclosure attorney.