When I bought my home, I spent a lot of time carefully choosing the mortgage lender. After filling out the application, supplying all of the required documentation, and getting the loan approved, I was surprised to find out that my relationship with that lender is likely a relatively short one. (I recently found out that mortgage lenders often sell the loans that they originate in order to bring in income so that they can turn around and—I guess no surprise here—make more loans.) If my lender sells my loan to a new owner, how will I find out?
If the lender sells your mortgage loan to a new owner, the new owner must, by law, notify you of that fact. (This notice is different from the notice that your mortgage servicer must send you if the servicing rights are transferred.)
Read on to learn more about the difference between a mortgage owner and servicer, when the new owner of your mortgage loan will send you notice about an ownership transfer, and what sort of information the notice will contain.
First, let's define the terms "lender," "owner", and "servicer" when it comes to the mortgage business.
The mortgage lender or owner. The mortgage lender is the financial institution that loaned you the money. The lender is the loan owner at this point. Later on, the lender may sell the mortgage debt to another entity (often called an "investor"), which then becomes the new owner of the loan.
Mortgages are bought and sold frequently in the mortgage industry. The sale of your mortgage loan to a new owner does not affect the terms or conditions of the mortgage contract.
The servicer. A mortgage servicer handles the day-to-day tasks associated with mortgage loans, such as collecting and processing payments, responding to borrower inquiries, managing escrow accounts, and processing foreclosures.
The servicer might be the lender that gave you your loan, or a subsequent owner of the loan. Or, it might be a separate company that acts on behalf of the owner. If a separate company is the servicer, the owner of the loan will rely on that company to handle the management of your loan account. (Learn more about how mortgage servicing works.)
In 2009, President Obama signed the Helping Families Save Their Homes Act of 2009 into law. Among other things, it amended the Truth in Lending Act to require that borrowers get notice when the mortgage debt on their primary home has been sold, transferred, or assigned to a new creditor.
When you'll get notice about the new owner. The creditor that is the new owner or assignee of the mortgage debt must notify you about the change of ownership no later than 30 days after the sale, transfer, or assignment.
What the notice will say. The notice that your new lender sends to you must include:
If your mortgage debt is sold and you get an ownership transfer notice, this doesn't necessarily mean that the servicing rights to the mortgage were also sold or that you'll get a new servicer.
How you'll know if your servicer changes. In most situations:
Or the servicers might choose to send a combined notice not less than 15 days before the transfer.
If you have questions about your loan, contact your servicer. It's important that you send your monthly payments to the servicer of your mortgage, not the loan owner—unless the owner is also the servicer. You should also direct any questions that you have about your loan to your servicer.
How you can find out who your servicer is. To find out who your servicer is, check your monthly mortgage billing statement or payment coupon book. The servicer is the company that you make your payments to.