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Question: We received a letter from our lender saying our mortgage has been sold to someone else. Have we done something wrong? Is there some kind of problem here?
Answer: Let’s imagine that you have a mortgage with a $150,000 balance. To you, it’s a debt and a liability. To a lender, your mortgage is an asset that produces a given level of income. It may even appreciate in value.
In this particular case, the owner of the mortgage, a party you know as your lender, has sold it.
Is this something to worry about? Not at all.
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What Happens When Your Mortgage Is Sold
First, a mortgage is a contract between you and a lender. The fact that there is now a new lender in the picture does not change the terms of your agreement. The interest rate remains the same, and the mortgage terms do not change. What’s different is that your payment may go somewhere else. But this won’t affect your mortgage.
Second, federal rules require notices. A new owner must generally tell you about the sale within 30 days. If the company that collects your payments (your servicer) changes, you also receive two notices of transfer: one from your old servicer and one from the new one. Your old and new servicers may combine these notices into a single document.
You must get the old servicer’s notice at least 15 days before the transfer. You must also get the new servicer’s notice not more than 15 days after the change.
As a matter of convenience, and to save postage, a servicer has an incentive to send both at once.
Third, for a new mortgage, you can receive the transfer information at closing.
Fourth, the notice of transfer must include information such as the date of the transfer. It must also list a toll-free or collect call telephone number where you can get information and ask questions. In addition, it must give the date the current servicer will no longer accept your payments.
Fifth, and this is the biggie, you have important protections when a loan transfers.
60 Days of Protection From Late Fees
According to the Consumer Financial Protection Bureau, “during the 60-day period beginning on the date of transfer, no late fee or other penalty can be imposed on a borrower who has made a timely payment to the transferor servicer (former servicer). Additionally, if the transferor servicer (former servicer) receives any incorrect payments on or after the effective date of the transfer, the transferor servicer must either transfer the payment to the transferee servicer (new servicer) or return the payment and inform the payor of the proper recipient of the payment.” (parenthesis theirs)
Translation: Your old servicer just can’t dump you. They have certain obligations to make sure your account is correct and timely.
How Escrow Works After Your Mortgage Is Sold
In addition to the transfer of your account from one servicer to another, there is also the matter of money.
Many loans have escrow accounts. These accounts hold funds for the payment of costs such as property taxes and property insurance.
In a transfer situation, the original servicer will transfer the escrow funds to the new servicer. Some states also require notices to your insurance company and local taxing authority so they know who to bill.
If you do not have an escrow fund, your loan documents and applicable law decide whether the new loan owner can require you to establish one. If you do have one, a new escrow analysis may raise or lower your monthly payment to reflect changes in tax and insurance costs.
Confirm a Transfer Notice Before You Pay
IMPORTANT: You may receive a notice telling you to send mortgage payments to a new servicer. If so, contact your current servicer to confirm the transfer request. Ask if the transfer notice is correct. Then get your current loan balance, escrow balance, and the date the servicer received your last payment. Check to assure the information you receive is accurate.
The reason to be cautious is that we live in a world where new forms of fraud constantly arise. As an example, the Federal Trade Commission and the National Association of Realtors issued a warning in March 2016. They warned home buyers about an email and money wiring scam.
“Hackers have been breaking into some consumers’ and real estate professionals’ email accounts to get information about upcoming real estate transactions,” said the FTC. “After figuring out the closing dates, the hacker sends an email to the buyer, posing as the real estate professional or title company. The bogus email says there has been a last minute change to the wiring instructions, and tells the buyer to wire closing costs to a different account. But it’s the scammer’s account. If the buyer takes the bait, their bank account could be cleared out in a matter of minutes. Often, that’s money the buyer will never see again.”
As always, be careful out there.
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