Mortgage Transfer FAQ
What is a Transfer of Servicing?
The practice of selling or transferring the servicing of your loan is very common in the mortgage industry. When you take out a mortgage, it is always a possibility that the lender will sell or transfer the servicing of your loan to another mortgage servicer. Mortgage servicing means the collection of payments and management of operational procedures related to your home’s mortgage. When your servicing is sold, it means that another mortgage servicer will be taking your payments, handling your escrow accounts, paying your insurance and taxes and answering your questions. This could happen right after you close the loan or several years later.
Whether your mortgage servicing is sold has nothing to do with the quality of your loan or your payment history. It has nothing whatsoever to do with you personally.
How Does a Transfer Affect Your Loan?
The company/investor that holds your loan makes the decision to transfer servicing rights to another mortgage servicer. The company does not have to ask your permission to transfer the mortgage servicing rights, but the company/investor is required to inform you of the transfer.
The transfer of your mortgage servicing will have no effect on you or your mortgage. The original terms and conditions of your mortgage will stay the same. Your interest rate and duration of your loan will not change on fixed rate loans. Your payment should stay the same or on the same schedule except in cases where changes in taxes or insurance requirements increase or decrease the escrow amount.
If you have an adjustable rate mortgage (ARM), the original conditions of the mortgage contract stay in effect and the rate will change per the adjustment periods (i.e. every six months, annually, every three years, etc). This information is contained in your contract, but you are welcome to verify the information with your new servicer. If your original lender agreed to let you refinance to a fixed-rate mortgage within a certain timeframe, you should ask whether this agreement would be honored by the new lender.
When Will You Be Notified?
When your lender decides to transfer mortgage servicing, a goodbye letter will be sent at least 15 days before the transfer date. The letter should state who your new mortgage servicing company will be, their payment address, correspondence address and contact phone number. You will also receive a welcome letter from your new mortgage servicer that outlines the same information, not later than 15 days after the transfer date.
Where Do You Pay Your Next Payment?
You should continue to send all payments to your previous mortgage servicer until the effective transfer date provided in your goodbye and hello letters. It’s up to your previous mortgage servicer to apply those payments to the loan, or forward any received payments to the new mortgage servicer for application once the loan goes live/active on their servicing system of record. It is very important that you read and understand the letters you receive. If you have any questions, please call your current or new mortgage servicer and they can answer any of your questions.
What Happens to Your Escrow Account?
It is your previous mortgage servicer’s responsibility to inform your insurance company and your property tax authority of the new mortgage servicer. A follow-up call to your insurance company or taxing authority can help ensure that the tax or insurance bill is sent to the correct mortgage servicer. Make sure they have your current contact information in case they need to contact you. If your loan is transferring to Statebridge Company LLC, please make your insurance company aware of our mortgagee clause, listed as follows:
ISAOA / ATIMA
P.O. Box 7086
Troy, MI 48007-7086
You should make sure to transfer the beneficiary to ensure that, in case of a claim, the check is written and sent to the appropriate mortgage servicer.
If your escrow account is interest-bearing, all interest due should be posted to your account by your previous servicer before the date of transfer.
During the twelve months after your mortgage servicing is transferred, your new lender will perform an escrow analysis. During the analysis, your new mortgage servicer will review your escrow payment and determine if it is adequate to cover the amounts of your tax, insurance and (as applicable) mortgage insurance payments for the upcoming year. If the amount is found to be insufficient, your new mortgage servicer may increase your escrow payment to collect for these amounts.
What About Insurance Policies and Taxes?
If you receive a notice that either your insurance or taxes are due, call your new mortgage servicer to make sure that they are aware of the upcoming payment. If the new mortgage servicer has not received a copy of the bill, they will ask you to send a copy for review. A tax or insurance payment is typically made by your previous mortgage servicer when due during the first 60 days after the mortgage servicing transfer.
Some mortgage servicers offer to escrow life or disability insurance (insurance that would pay off the mortgage in case of death or make payments in case of disability). Statebridge Company LLC does not currently offer these policies or escrow for them.
Who Sends Your End of Year Tax Statement?
Each mortgage servicer will be reporting the interest paid on your mortgage loan for only the portion of the year that each serviced your loan. When preparing to file your income taxes for the previous year, look for a 1098 tax statement from each servicer of your loan during that year.
Do You Have More Questions?
Usually your previous mortgage servicer will make sure everything is taken care of prior to the transfer, but, it is in your best interest to check on all details. It is best to ask questions at the time of the transfer to make sure everything is handled before your previous mortgage servicer purges your records from its files. It is much more difficult to get information from an institution that has not handled your loan for the last six months.
If you have questions regarding your specific transfer, it is always best to contact your new mortgage servicer in writing. At times of servicing transfers, most mortgage servicers are flooded with phone calls, so, you may get faster and clearer information through the mail.
Things to Do:
- Always keep your mortgage servicer informed of any changes in your address and phone number. Provide this information in writing and forward it to the address indicated in your welcome letter. This address is usually different from the one that you would send payments.
- When your servicing is transferred, make sure you receive both a goodbye letter and a welcome letter. If you don’t receive both letters, call your previous mortgage servicer to verify the transfer.
- When you receive the letters, read them carefully making note of the new mortgage servicer’s name, address, phone number, contact name and payment information.
- When making your payments after your mortgage servicing has been transferred, follow the instructions in the welcome letter.
- Make sure that your insurance companies (homeowners, flood/hazard, life/disability) and your tax authority have been notified of the servicing transfer.
- Find out which company will be reporting on your interest paid for income tax purposes.
Ask questions at the time of the servicing transfer. If there is a problem, it is easier to handle it as soon as it arises. If you have questions after the transfer is completed, contact your new mortgage servicer.