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 and maybe even appreciates in value.
In this particular case, the mortgage has been sold by the owner, a party you know as your lender.
Is this something to worry about? Not at all.
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 will go somewhere else – but this won’t affect your mortgage.
Second, federal rules require that you receive two types of notices: a disclosure and a transfer of servicing notice. These notices might be combined into a single document.
You must get the disclosure at least 15 days before the transfer, and the servicing notice must be provided not more than 15 days after the change.
As a matter of convenience, and to save postage, a lender has an incentive to send both at once.
Third, for a new mortgage, you can be given the transfer information at closing.
Fourth, the disclosure must include such information as the date of the transfer, a toll-free or collect call telephone number where you can get information and ask questions and the date the current servicer will no longer accept your checks.
Fifth – and this is the biggie – you have important protections when loans are transferred.
According to the Consumer Financial Protection Bureau, “during the 60-day period beginning on the date of transfer, no late fee or other penalties 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.
In addition to the transfer of your account from one servicer to another, there is also the matter of money.
Most loans today have escrow accounts to 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. Your insurance company and local taxing authority will be notified regarding the transfer so they know who to bill.
If you do not have an escrow fund, then the new loan owner cannot require that you establish one. However, with a new escrow analysis, your monthly payment may rise or fall to reflect changes in tax and insurance costs.
IMPORTANT: If you receive a notice telling you to send mortgage payments to a new servicer, contact your current servicer to confirm the transfer request. Ask if the transfer notice is correct and get your current loan balance, escrow balance, and the date when the last payment was received. 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, this summer the Federal Trade Commission and the National Association of Realtors warned home buyers about a new mortgage 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.