Once you’ve gone through each step of the mortgage process, you will have secured a home loan and finally purchased your home. However, mortgage closing does not signify the end of the home loan process.
In many cases, home loans are transferred to other companies for the purpose of servicing. Oftentimes, this occurs even before one makes the first payment.
Loan servicing transfer is no reason to be concerned. The truth is that the transfer of loan servicing to another company from the initial lender is very common in the industry mortgage.
While there is no reason for you to be panic, it is important that you have a good understanding of what your rights as a borrower are. You should also know what to expect throughout the transfer process.
Definition: Transfer of Loan Servicing
The transfer of loan servicing is when the lender hands over the loan management to a new servicing company or mortgage company.
What this means for the borrower is that there will be a new institution in charge of collecting the payments, dealing with tax or insurance matters, handling escrow accounts, and answering questions.
The transfer will not have an effect on your mortgage payment. The payment schedule, loan amount, contractual payment obligation, and interest rate will all remain the same.
The only change as a result of the transfer of loan servicing will be where your monthly mortgage payment is sent.
Keep in mind that the transfer could occur any time during your loan’s lifetime. Sometimes, the transfer occurs right after closing, even before you make your first payment.
According to the Real Estate Settlement Procedures Act (RESPA), lenders need to offer certain disclosures during the process of the mortgage. This is including the Mortgage Servicing Disclosure Statement.
The purpose of the Mortgage Servicing Disclosure Statement is to explain whether the lender will transfer servicing or will service the loan.
Notice of Transfer of Loan Servicing
If the lender is transferring the servicing of the loan, it is important that you get two notices in the mail.
- A letter from the current servicer, which should be received at least 15 days prior to the transfer date. This is frequently called the “goodbye” letter.
- A letter from the new servicer. This is frequently called the “hello” letter and it should be offered within 15 days of the date when the transfer is made effective.
Avoid Loan Servicing Transfer Scams
Rarely, borrowers will receive a letter that is intended to indicate the loan servicing transfer. If you only get one letter, it should be for both sides of the servicing. The letter should include the “welcome” statement from the new servicer and the “goodbye” statement from the current servicer.
However, you should be concerned if you don’t receive a “goodbye” letter but not a “welcome ” letter. It is possible that it is a mortgage scam, designed by a scammer who wants to collect your monthly payments.
For more information about how you can transfer your mortgage and the benefits of a FHA loan, don’t hesitate to contact us.