My mortgage was transferred, who do I pay now?
The transfer of servicing on your mortgage can be tricky and confusing.
A letter comes in the mail from the mortgage company. Upon opening the envelope, out falls a notice that your lender is no longer servicing your mortgage loan and payments must now be made to a new, often unknown company. It’s become more common in the past ten years for homeowners to have the servicing of their mortgage transferred at least once and often multiple times to a new mortgage servicing company.
Can they do that? The short answer is yes, they can. Under the Real Estate Settlement Procedures Act, commonly known as RESPA, mortgage companies or lenders may transfer, sell or assign the servicing of a mortgage. It’s important to understand that this is not personal. The mortgage company isn’t looking at names or addresses and deciding which mortgages get transferred and which do not. It’s strictly a financial decision.
The reason mortgage companies transfer mortgages is to raise money. A mortgage loan is an asset to the mortgage company but since most loans are stretched out over 30 years, the income to the lender is a very slow stream. They sell the mortgages, usually in bundles, to raise funds so that they can grant more mortgages. Very few lenders hold onto the mortgages they make for the life of the loan. The largest purchasers of these mortgages are Fannie Mae and Freddie Mac. However, neither Fannie Mae nor Freddie Mac service loans. Instead, they pay other companies a premium to service these mortgages.
RESPA has been amended several times, most recently in October, 2015. However, it is still true that notice may be given to begin paying a new servicer. Giving notice is the key here. Under the Consumer Financial Protection Bureau (CFPB) regulations, both the old and new servicer must give the mortgage holder at least 15 days’ notice of a transfer. They must also give up to 60 days to switch over the payment to the new servicer without charging late fees or marking the payment as late as long as the payment was sent on time to the previous service.
It’s also important to remember that while the transfer of servicing is legal, the homeowner does have rights regarding receiving notice of the transfer. The homeowner must be given notice of transfer and notice of the new servicer. These notices can be combined but must include:
- The new servicer’s name
- Contact information
- The date the transfer is effective
- Whether the transfer is being recorded in public records.
Read the notice very carefully to make sure the information regarding your mortgage is correct. If the homeowner was in the middle of requesting a loan modification, they may need to start over. Most of the time, mortgage servicing transfers go smoothly. If for some reason, that isn’t the case, a HUD certified housing counselor can assist you with this process. To contact an expert in your area, visit the expert page, or call 888-MSUE4MI (888-678-3464).
Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, go to either the events page or the MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health.
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at the MI Money Health website.