Our company did a really smart thing during the pandemic, we built a portfolio of loans that we not only originated, but then we held onto the servicing (collecting payments) part. This was because the market, at the time, was a little nuts with all the refinancing and the value of selling the loans right away was not what we thought it should be. So we have had about 25,000 loans paying the servicing branch of our company for a few years.
With the increase in rates, market conditions have changed and a decision was made at the corporate level to sell a few thousand of those loans. My best guess is that in 2022 the likelihood that a sub 3% fixed rate loan pays off is very low. Lower than it has been in years, and now these loans can be sold for a premium as the new investor will keep a larger percentage of the loans they buy for longer. So they would theoretically command a higher price than before.
I have had a front seat to this transition as the mortgage on my home was one of those sold. So though I have known the rules around these transfers for a while, it’s been interesting to see how the hand off from one lender to another plays out in real time. I will share these rules and detail my experience and hope it helps.
The first thing to know is that given the high financial stakes surrounding your mortgage for you and both lenders there are safeguards in place to make sure this transition is as seamless as possible. These are standardized in the industry by regulation and no matter who your current servicer is and what lender your loan is sold to, the process is the same.
The first of these safeguards is double notification. Your existing servicer, in my case Benchmark Servicing sent a letter that basically says: heads up, your loan is being sold to “Lender X”. They will be in touch with you about how things will work when your loan officially transfers to them on X date. This letter arrived in the US mail at my home and is the only official communication about the transfer from the current servicer. No email or texting of this info.
A few days later the second notification came from the new lender. This was also snail mail and it should not be considered official until you have both letters and the data match. Some email scams just ask you to log in and start sending your mortgage to a new location. So don’t trust this without the double notification from current and new servicers by US Mail.
This notification told me a few things of note. First, I have a new loan number. Second, that the terms of my loan will not change. Third, they have an app that I can use to pay them and the date that will be available to me. There were also some other details about communicating with them, statements, my escrow account etc.
Finally, and this is a big one. If you pay the old lender for 60 days after the transfer, under federal law, they won’t hit you with a late payment. Additionally, they specifically point out that any payment made to the old servicer electronically will be returned to the borrower so you can pay the new servicer. Any payment mailed to the old servicer will be forwarded to the new servicer.
So that’s the story. It can be a minor annoyance when this happens but your existing servicer is selling your loan because they want to free up the money for some other business purpose. Sitting on a few thousand loans of $300K each may mean you have a lot of cash tied up. Your new lender feels that your loan (and all the others they are buying with it) are a solid investment for them as is. Sure it’s a paperwork hassle, but if you give it about fifteen minutes of attention over the few weeks it happens, it should be easy.
If it’s not, both companies should have provided toll free phone numbers for you to straighten out any issues as well as an email to handle your concerns.
