Did you recently receive a notice informing you that your mortgage company will be changing?  Maybe you haven’t yet, but it is likely that during the term of your mortgage you will receive a notice like this.  This notice is called a Transfer of Servicing and you should understand what it means to you.

What Does Transfer of Servicing Mean?

There are normally two entities involved with your mortgage after closing – mortgage owner and mortgage servicer.  In some cases these two entities can be the same company while many times they are separate companies.  The mortgage owner is exactly as it sounds – they are the owner of the mortgage earning the interest that you agreed to pay when you closed on your mortgage.  The mortgage servicer, on the other hand, is the company that collects the mortgage payments on behalf of the mortgage owner.  Normally, the mortgage owner will pay a mortgage servicer to do the work of collecting the payments so they don’t have to.

When you receive a notice that you mortgage servicing is being transferred this means that the company that is collecting your mortgage payments has changed.  The reason this happens is because either the mortgage owner hired a different company to collect the payments, the servicer discontinued their servicing on your mortgage or the mortgage owner sold the mortgage to a new mortgage owner.  All you really need to know is that you will now be making payments to a different company.

How Will I Be Notified?

Notices from both your existing mortgage servicer and the new mortgage servicer are sent to you.  The current mortgage servicer will send you a notice stating that your servicing is being transferred and provide you the name and telephone number of the new mortgage servicer.  The new mortgage servicer will also send you a notice informing you they have taken over the servicing on your mortgage.

The reason this is important is to avoid fraud scams that attempt to redirect your payments to a scam company.  They have successfully collected thousands of dollars while the mortgage company that should have been paid is reporting late payments on your credit.

Can the Terms of My Mortgage Change?

No.  When the transfer of your servicing takes place the new servicer is merely collecting the payments for the mortgage you agreed to pay at your closing.  The rate and terms of repayment can not change.  Your monthly payment can change.  When the new mortgage servicer reviews your loan they may identify that the escrow account, for your property taxes and homeowners insurance, may not have been properly funded.  Based on this situation they may need to re-evaluate the accounts and recalculate your monthly payment.  Even though your payment may change, the end result would have been the same whether or not your current mortgage servicer continued to collect your payments.  If they were short or had an overage they would have collected the funds from you or provided a refund, respectively.

Your Rights

The Federal Trade Commission has put together a great website for reference to your rights related to the transfer of your mortgage servicing.  The FTC has provided all the laws and requirements that must be followed to protect you.  The requirements include some of the topics already covered but also share with you the rights related to your payments:

There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer.

For all the details be sure to read the full page.

When in doubt, it is best to contact your current mortgage servicer and ask them all the questions you need to know.  You can verify the servicing was transferred and what your rights are.  They should be willing to help you with all of your questions.