You recently closed on your mortgage loan and have been making your payments to your lender. Then one day, you get a letter in the mail informing you that your loan has been sold and you have a new mortgage servicer taking care of your loan. What does this mean and how does it affect your mortgage? Here’s what you need to know about mortgage servicers:
It is very common for your lender to sell your loan soon after originating it. Many lenders and brokers do not have enough reserves to keep mortgage loans on their books. Instead they sell them to investors or government-backed enterprises like Fannie Mae and Freddie Mac, who usually take many mortgage loans and package them together to be resold to other investors. Those investors pay mortgage servicers to be the caretakers of those loans, who handle the administrative details such as receiving payments and managing the escrow accounts. A mortgage servicer works for your lender or investor who owns your home loan. If the investor decides to go with another company or again sells your loan, it is possible that you could have several mortgage servicers over the course of your loan.
How Things Change
When your loan is assigned to a new mortgage servicer, your former servicer (sometimes your original lender) must notify you in writing of the change. You will start sending your mortgage payments to the new address as of the given date. If there are any changes to the terms of your homeowner’s insurance, you will also receive notice. The transfer time frame will include a 60-day grace period with no late fees if you accidentally send your mortgage payment to your previous servicer. What will not change are the terms and conditions of your original loan. That means your interest rate, APR, loan length and monthly payment should all stay the same.
Mortgage Servicer Responsibilities
Your loan servicer is responsible for receiving your mortgage payment and parceling it out to the appropriate parties. This includes sending the principal and interest to the owner of your loan, sending taxes to the government, home insurance premiums to the insurance company, and mortgage insurance premiums to the mortgage insurance firm. If there are homeowner’s association fees attached to your home loan, the servicer will also take care of those.
Working with Your Servicer
Ideally, your relationship with your servicer should be simple and hassle-free. If issues do arise, you can send your concerns or disputes in writing to the servicer (while continuing to make payments) and within 60 business days your servicer is required by law to investigate and resolve any errors.
Unfortunately, borrowers have almost no control over who services their mortgages. The only way to guarantee a certain servicer is to take out your original loan (or refinance) with a company that retains the servicing themselves or that does not sell its mortgage loans. These are rare, however. If you have a major dispute with your mortgage servicer, you can file a complaint with the Consumer Finance Protection Bureau (https://www.consumerfinance.gov/) which oversees the business practices of banks and lenders.
If you are unsure who services your mortgage, you can look at your home loan statement or contact your original lender.
If you're not happy with your current mortgage servicer, please give us a call today at 413-737-1100 and we can help you refinance your loan which could change your mortgage servicer.