As a first-time home buyer, you might be surprised, and maybe even panic when you receive a letter in the mail saying that your mortgage has been sold to another mortgage company. This is nothing to panic about, as it happens quite often. But there are some things that you should be aware of when you are dealing with a new lender who is taking over your home loan.
Understand Why Mortgages Are Sold
The decision to sell a mortgage to another lender is purely a business decision and has nothing to do with you. In fact, to a financial institution your mortgage is just another financial asset. Most mortgage companies will sell off loans in order to free up some of their capital, which allows for them to lend to other mortgages.
Notification of Your New Lender
By law, if your lender sells off your loan, you are to be notified within 15 days of the sale. You will receive two letters, one from your original mortgage lender, and another from the new lending company. In these letters you will be provided with the necessary information required to communicate with your new lender, and information on how and where to make your payments. You will need to make sure that you send all future payments to the new address provided to you by your new lender. Additionally, the new lender does not have the right to make any changes to the terms and conditions of your loan. This means that your payment will not change, just because the servicer of your loan changed.
After a mortgage transfer from one mortgage company to another, you are protected under the Real Estate Settlement and Procedures Act (RESPA) for a limited amount of time. Following the sale of your mortgage, there is a 60-day grace period where the new lender is prohibited from charging penalty or late fees if you mistakenly send your payment to the previous lender. This protection is in place to protect the homeowner, in case there is any miscommunication or a delay in notification of the sale of their loan. Additionally, if your payment happens to be late, the lender can not report it to any credit reporting agency, or deem your loan as being delinquent during the 60-day grace period.
Check for Accuracy
During the sale of your mortgage, there is the possibility for errors to occur. While errors are uncommon, they could potentially happen. That is why it is recommended that you carefully review the statement you receive from your new lender and compare it to the statement provided by your previous lender. In the event that there is a discrepancy or error, write a complaint letter to your new mortgage provider and dispute the error. By law, your lender must respond to your dispute within 20 business days, and act in the event of an issue that requires resolution within 60 business days.
It is not uncommon for mortgages to be sold once, or multiple times over the lifetime of your loan. Conversely, it may never be sold again. Regardless, of how many times your loan is sold, continue to make your monthly payments on time, and you’ll remain in good standing.