Many mortgage lenders must now meet stringent guidelines and make disclosures to consumers who hope to obtain a loan. A mortgage servicing disclosure provides information from the lender about whether or not the servicing of the loan may be transferred, sold, or assigned to some other person or entity during the life of the loan. Generally, a process or loan originator provides this disclosure, as required under the regulations of the Consumer Finance Protection Board, which implements RESPA. If you are concerned about mortgage servicing disclosures, the Boston real estate attorneys at Pulgini & Norton may be able to provide advice, counsel, and representation.
Mortgage Servicing DisclosuresMany people become confused between their mortgage lender and their mortgage servicer. The lender is the financial institution that loaned you money, while the mortgage servicer is the company to which you send your monthly mortgage payment. Generally, a single loan comes with tasks performed by the mortgage servicer. The servicer will process your loan payments, respond to your questions, track the interest and principal as they are paid off, and manage your escrow account. If you skip multiple loan payments, the servicer is the entity that may start the process of foreclosure.
A mortgage servicer may not be the same entity that provided you with your loan. Often, the initial company that serviced the loan will transfer or assign the servicing to another entity.
By law, you are entitled to mortgage servicing disclosures when you buy a home that you financed with a loan. These disclosures require the lender or mortgage broker to provide you with information such as whether the lender plans to service the loan itself or transfer this task to another lender.
Your lender is supposed to give you a loan ownership transfer notice when it sells your mortgage. Additionally, the new owner of your loan should notify you within 30 days of the date on which the transfer becomes effective. Included in the notice should be information about the new mortgage owner’s identity and contact information (and if different, the person who will resolve problems related to loan payments or your right to rescind the loan), the date of transfer, and whether the transfer of ownership is recorded in public records.
Generally, consumer consent is not mandated when a mortgage is sold. Many people are alarmed by this freedom because the mortgage relates to your home. However, from a bank's perspective, the loan is a financial asset and thus may be transferred, as long as appropriate disclosures are made. Lenders choose to sell mortgages so that they can clear their credit lines, obtain more money from the sale, and lend money to other prospective homeowners. The lender needs to have enough capital to lend to other people and continue to make money, and selling the loan accomplishes that goal. The lender may charge origination fees, earn interest from some of the monthly payments, and then make a commission on the sale. Servicing a loan entails daily tasks that the lender may not be interested in performing for 15-30 years, the average life of a mortgage. Meanwhile, the mortgage servicer makes money by administering the loan.
Ultimately, when a loan is sold to a different servicer, the only thing that changes is the address to which you send a mortgage payment. The original loan is supposed to remain the same with regard to how much you owe, your interest rate, the type of loan, and other details. The loan changes only if you become delinquent on your payment. However, there may be logistical difficulties when servicing rights are transferred. Therefore, it is important to read the first mortgage statement that you get from the new servicer. If you were applying to get your loan modified, you need to be aware that you should start this process anew.
Discuss Your Situation with a Knowledgeable Boston AttorneyAt Pulgini & Norton, our experienced Boston lawyers can advise you on securing a mortgage and mortgage servicing disclosures, among other aspects of any real estate transaction. Our firm handles property transactions in Newton, Lowell, and Cambridge, among other Massachusetts cities. For a consultation with a mortgage lawyer, contact us online or call us at 781-843-2200.