Dealing with the transition when your lender transfers your home loan.
When I bought my home, I spent a lot of time carefully choosing the mortgage lender. After filling out the application, supplying all of the required documentation, and getting the loan approved, I was surprised to find out that my relationship with that lender is likely a relatively short one. (I recently found out that mortgage lenders often sell the loans that they originate in order to bring in income so that they can turn around and—I guess no surprise here—make more loans.) If my lender sells my loan to a new owner, how will I find out?
Answer
If the lender sells your mortgage loan to a new owner, the new owner must, by law, notify you of that fact. (This notice is different from the notice that your mortgage servicer must send you if the servicing rights are transferred.)
Read on to learn more about the difference between a mortgage owner and servicer, when the new owner of your mortgage loan will send you notice about an ownership transfer, and what sort of information the notice will contain.
The Difference Between a Mortgage Lender, Owner, and Servicer
First, let's define the terms "lender," "owner", and "servicer" when it comes to the mortgage business.
The mortgage lender or owner. The mortgage lender is the financial institution that loaned you the money. The lender is the loan owner at this point. Later on, the lender may sell the mortgage debt to another entity (often called an "investor"), which then becomes the new owner of the loan.
Mortgages are bought and sold frequently in the mortgage industry. The sale of your mortgage loan to a new owner does not affect the terms or conditions of the mortgage contract.
The servicer. A mortgage servicer handles the day-to-day tasks associated with mortgage loans, such as collecting and processing payments, responding to borrower inquiries, managing escrow accounts, and processing foreclosures.
The servicer might be the lender that gave you your loan, or a subsequent owner of the loan. Or, it might be a separate company that acts on behalf of the owner. If a separate company is the servicer, the owner of the loan will rely on that company to handle the management of your loan account. (Learn more about how mortgage servicing works.)
Notice About the Ownership Transfer
In 2009, President Obama signed the Helping Families Save Their Homes Act of 2009 into law. Among other things, it amended the Truth in Lending Act to require that borrowers get notice when the mortgage debt on their primary home has been sold, transferred, or assigned to a new creditor.
When you'll get notice about the new owner. The creditor that is the new owner or assignee of the mortgage debt must notify you about the change of ownership no later than 30 days after the sale, transfer, or assignment.
What the notice will say. The notice that your new lender sends to you must include:
- its identity, address, and telephone number
- the date of the transfer
- how to reach an agent or party having authority to act on behalf of the new owner
- the location where the transfer of ownership of the debt is recorded in the public records, and
- any other relevant information regarding the new owner.
Your Servicer Might Not Change If the Loan Ownership Changes
If your mortgage debt is sold and you get an ownership transfer notice, this doesn't necessarily mean that the servicing rights to the mortgage were also sold or that you'll get a new servicer.
How you'll know if your servicer changes. In most situations:
- your old servicer must send you a notice of servicing transfer not less than 15 days before the effective date of the transfer and
- your new servicer must provide a servicing transfer notice not more than 15 days after the transfer date.
Or the servicers might choose to send a combined notice not less than 15 days before the transfer.
If you have questions about your loan, contact your servicer. It's important that you send your monthly payments to the servicer of your mortgage, not the loan owner—unless the owner is also the servicer. You should also direct any questions that you have about your loan to your servicer.
How you can find out who your servicer is. To find out who your servicer is, check your monthly mortgage billing statement or payment coupon book. The servicer is the company that you make your payments to.
FAQs
What happens when your mortgage is sold. When your mortgage is sold, a new company is typically buying the servicing rights. Those rights include collecting and processing the payments, along with all the additional regular duties that come with mortgages.
Is it bad if your mortgage gets sold? ›
Mortgages are bought and sold frequently in the mortgage industry. The sale of your mortgage loan to a new owner does not affect the terms or conditions of the mortgage contract.
Can a mortgage be transferred to a new owner? ›
The short answer is yes, you can transfer your mortgage to another person, but only under certain circ*mstances. To find out if your mortgage is transferable, assumable or assignable, contact your lender and ask.
What happens when a mortgage is transferred? ›
A transfer or sale of your mortgage loan should not affect you. “A lender cannot change the terms, balance or interest rate of the loan from those set forth in the documents you originally signed. The payment amount should not just change, either. And it should have no impact on your credit score,” says Whitman.
Is it bad that my loan was transferred? ›
In reality, having your loan sold to a new servicer won't impact you much beyond writing a different name on the mortgage check or processing your monthly payment on a different website. The terms you agreed to at your closing – loan type, term and interest rate – will stay the same.
Do you skip a payment when your mortgage is transferred? ›
You have a 60-day grace period after a transfer to a new servicer. That means you can't be charged a late fee if you send your on-time mortgage payment to the old servicer by mistake — and your new servicer can't report that payment as late to a credit bureau.
What happens to the escrow account when a mortgage is sold? ›
If any money related to your mortgage was being held in escrow, the balance of that account will be refunded to you. (Escrow funds won't be turned over at the closing table, though — it may take a few months.)
How do I change my mortgage from one person to another? ›
How to Transfer a Mortgage
- Review Your Mortgage Documents. It's a good idea to double-check your loan agreement to see if you're allowed to transfer the mortgage. ...
- Request a Transfer. Contact your lender to initiate the transfer. ...
- Consider Extra Help. ...
- Complete the Transfer.
Not all mortgages can be transferred to another person. If a mortgage can be transferred, the lender has the right to approve the person assuming the loan. Many mortgage lenders often include a due-on-sale clause in their loans that prohibits a home seller transferring a mortgage to a buyer.
How to take over a parents' mortgage? ›
If you have the right to ownership and plan to live in the property, you also have the right to take over the mortgage. You can let the lender know and may need to supply a death certificate to prove that you're now the rightful owner.
Key takeaways
When you assume a mortgage from a home seller, you become responsible for that loan at its existing interest rate and terms. The seller signs the balance over to you, while you compensate them for the amount they've already paid off. You can only assume a government-backed loan, such as an FHA or VA loan.
Why are mortgages not transferable? ›
“Banks rely on this to protect them against interest swings. They have no incentive whatsoever to allow a transfer, as it would only benefit the borrower. Furthermore, mortgages are tied to specific property and aren't transferable to a new one.”
Is it easy to transfer mortgage to another person? ›
The process of transferring a mortgage to one person usually involves an interview and consultation with a solicitor, and you might have to have your property revalued. There's likely to be admin and legal fees, and possibly stamp duty if you're making a substantial payment to the other joint owner.
Can you do anything about your mortgage being sold? ›
While you can't stop the sale of your mortgage, you have rights under the Real Estate Settlement Procedures Act (RESPA) that require both your current and new servicer to provide you with notices and information about the transfer.
How long does a mortgage transfer take? ›
How long does it take to port a mortgage? If your lender lets you progress with a mortgage port, moving a mortgage to your new property could take anywhere from 30 days to three months to complete, giving you time to move into your new property.
What happens when your loan is sold to another company? ›
While the loan is being transferred, borrowers are afforded a 60-day grace period that prohibits the new lender from collecting late fees or declaring a loan delinquent. In addition, the terms of your original mortgage are set in stone and cannot be modified by the new lender or servicer.
What to do if a bank sells your mortgage? ›
Federal law protects borrowers when loans are bought and sold by requiring that both the old and new lenders notify you in writing within 15 days of a sale that a transfer has taken place. The letters should provide the name of the new lender, how and where payments can be made, and when your next payment is due.
Is it normal for banks to sell mortgages? ›
It's common practice to sell mortgages so that lenders can get more money to help finance additional mortgages. The process is cyclical and continues from there. When lenders sell loans, they're able to take this debt from their balance sheet and free up their credit for new customers.
Does a mortgage transfer affect credit score? ›
A simple transfer of your loan from one servicer to another generally won't impact your credit on its own. Continue making on-time payments to avoid hurting your score.
Is it common for home loans to be sold? ›
While selling mortgages is extremely common, it's important as a homeowner to understand the process as well as who is involved. No matter where life takes you – whether that's a new home or a home refinance – we're here to help you every step of the way. by see your options so you can make the best financial decision.
