Understanding Mortgage Transfers and Your Rights

When you bought your home, you probably felt like you signed a thousand documents relating to your mortgage. While you were signing your life away to the bank, they were not necessarily offering you a life long relationship. The practice of selling or transferring loans to investors, such as Fannie Mae or Freddie Mac, is quite common in today's mortgage industry. It is nothing to fear, but you need to know your rights if this happens.

First, understand that the sale or transfer of your loan does not affect your mortgage. The terms and conditions you signed at the closing will remain in effect. You will continue to pay your bill each month, just perhaps to a different company.

When the loan sale occurs, it may or may not include the servicing of the loan. Servicing refers to the collecting of payment and managing of the account. Some loans are transferred to an investor but the servicing remains the same. In this situation, you may not even be aware of the change. If servicing is sold, then a new lender is going to start taking your payments and managing your escrow accounts. You will be notified of this possibility at closing. If you receive a Mortgage Servicing Disclosure Statement, it means that your loan will be serviced or transferred at some point.

RESPA laws give you some protections if this happens. First, the loan servicer is required to send you a notice 15 days before the loan transfer becomes in effect. If you make a mistake during the transition time and make a payment to your old servicer, you will not be penalized, provided it is within 60 days of the loan transfer and the payment is made on time.

Remember, your existing lender is required to send you a "goodbye" letter, letting you know of the impending transfer. If you only receive a "welcome" letter from the new mortgage company, proceed with caution. Call your existing lender to verify the transfer. It could be possible that the letter got lost in the mail or you simply did not receive it yet, but you could also be dealing with a thief who is simply looking to get a few mortgage payments from you. Once you have both letters or verification from your current lender, start sending payments to the new servicer. Keep in mind that your payment may be due before you start getting a new statement from the new servicer, so follow all directions on sending in your payments in a timely manner.