What To Do If Your Mortgage is Sold
Find out how your bank's decision to sell your mortgage affects you
Banks, savings and loans, and other financial institutions may once have held onto the housing loans they originated for the entire life of the mortgage. However, it is now quite common for many of them to sell the mortgage to another institution. Some lenders will continue to handle customer payments and communications, but others may choose to also transfer the servicing of the account. These secondary mortgage market options diversify risk and provide greater stability to the larger mortgage market.
But what does it all mean for you, the borrower and homeowner?
Selling your mortgage vs. transferring the responsibility for serving the loan
Generally speaking, if a bank sells your mortgage to a different institution, but does not transfer the servicing of the account, nothing will change for you, the mortgage holder. In fact, the company name and address to which you have been sending your monthly payments will not change.
However, that may not be true if the servicing is transferred. In this case, the servicing company's name, address and perhaps even your account number may change. Because homeowners sometimes experienced difficulty getting timely information from the new institutions in the past, the federal government enacted rules dictating how customers must be notified about mortgage servicing transfers.
Federal rules on servicing transfer notifications
Section 6 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2605) requires your current mortgage loan servicer to send you a notice a minimum of 15 days before the effective date of a servicing transfer. The new servicer must also send you a notice within the first 15 days after the servicing transfer. This notice must include:
- The effective date of the servicing transfer
- Contact information for your current servicer and the new servicer, including their name, address and a toll-free number in case you have questions about the transfer
- The date your current servicer will stop accepting your mortgage payments and the date your new mortgage servicer will begin accepting them.
- Any impact on optional insurance products you included in your mortgage payment and any actions you need to take to maintain coverage.
Many homeowners pay the taxes and insurance on their house through an escrow account. If you have an escrow account set up and there is a servicing transfer, no action will be required on your part. Your new servicer will send you an Escrow Analysis Statement shortly after the servicing transfer occurs, and tax and insurance bills will continue to be paid in a timely manner as they come due.
There is a required 60-day grace period after the selling of the mortgage and servicing transfer. During that period, your new servicer cannot charge you a late fee if you sent payment to your former servicer.
Speak to a Citizens Bank representative for more information if your mortgage is sold
Citizens Bank generally does not transfer the servicing on mortgage loans we originate, but if you have more questions about why banks sell mortgages or transfer servicing, speak to a home loan advisor at 1-888-514-2300. You can also call to learn more about Citizens Bank's mortgage rates and convenient options for refinancing, or to start the mortgage application process.