What Happens When Loan is Transferred
Today, we’re going to talk about what happens when there is a mortgage servicing transfer. Hi, I’m Mike Ziegler Managing Attorney for the Debt Fighters. We’re a Florida law firm focused on helping consumers to eliminate serious debt.
So what’s happened? You’ve made all your payments. You’ve been good to your mortgage company, they’re supposed to be good to you. And then all of a sudden you get a notice in the mail that says your loan is going to transfer it’s servicing. What does that mean? What are the potential pitfalls? What should you be on the lookout for?
So first let’s talk a little bit about some of the historical background. Now it used to be that when you would go to your corner bank, that would be the bank that would take the loan money out for you. They would extend a loan to purchase your property, that’s the place where you would make all of your payments and you would know if you ever had a problem, that’s where you would go.
So what happened? In the eighties loans became securitized. What that means is that when you would take money out from a lender, in order to purchase a piece of property, they would then take the money that they had taken out for you and they would swap out that loan. Usually not with so much a company, but with a mortgage security.
So a mortgage security is just like any stock on Wall Street. It’s a package full of loans and that package of loans usually is not controlled so much by an individual, but by a contract. And this way, when an investor, whether it be an individual investor, an institutional investor, would put their money into that loan security, they would know the deal that they are getting.
Securitizing loans is a little bit of a give and take. So on the one hand, through loan securitization, the interest rate on loans has dropped because banks are able to extend their money more freely. But the downside is that when you have a problem with your loan, sometimes it’s a little bit more difficult to be able to communicate and problem solve.
Because the options that are available to your loan are going to be based on number of restrictions that are wholly outside of your control. And even to some degree, the lender’s control that you work with on a day to day basis.
Because of this concept of securitization, loan ownership and loan servicing, meaning the company where you make the calls when you’re having a problem or trying to make your payments, are separated out. So a loan servicer usually is not the same as your loan owner.
So what happens when there’s a servicing transfer? It’s quite frequent that the servicing of the loan, maybe the ownership of the loan, will change over the course of the life of the loan. It’s not a penalty. It doesn’t necessarily mean that you’ve done anything wrong or that you’re a bad borrower or anything like that. It’s just the bank’s way of doing business.
Now, what are some of the things to be aware of when your loan servicing has transferred? The most important thing to be aware of is that all of your payments are being given credit. So usually when loan servicing is transferred, the transfer isn’t seamless. It can take a little bit of time from the data from your old servicer to transfer to your new servicer.
You want to particularly pay attention to the letters that they send you, notifying you of your correspondence. Because that should provide you with start and stop dates for when to stop paying your old servicer and start paying your new servicer. It may be worth a phone call to each of them just to confirm those timelines and to make sure that you’re being given full credit for the payments that you do make. It’s also worth just reviewing your credit report to make sure that those payments are ultimately appropriately credited to you.
So where can a loan service transfers be a problem? Where loan service transfers can be a problem is really particularly if you’re in the middle of a loan modification with the prior servicer. Now, whether that modification is still in the evaluation process or if it’s been at least initially approved with a trial loan modification, or even if it’s been permanently approved, you’ll want to make sure to be vigilant with your old servicer and the new servicer, to make sure that there has been proper transfer of your documents and the status of the loan modification effort.
In some instances, the new servicer may want you to start all over again with submitting the loss mitigation application. While that may not be desirable, the key to loan modifications is diligence, keep pressing and keep providing all the documents that are requested of you.
That’s a little bit of information about loan servicing transfers. If you are in the middle of a loan servicing transfer, and particularly if you feel like it’s creating problems for your mortgage, please feel welcome to click on the Calendly link below and schedule a complimentary consultation with an experienced attorney, to help evaluate your options.
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