Tips for When Your Loan Servicer Changes
At PRM, we put expert service into your loan. We make sure our customers come first, and we pride ourselves in helping clients finance the homes of their dreams. Our customer service does not end when we set people up with home financing. We are here for you and your home lending needs well after your loan closes and you move in.
Residential mortgages are generally large loans that are serviced by large institutions. These loans may transfer hands, and therefore, the scheduled payment you make may need to be switched to a new company and/or address on occasion. This is very normal if you continue to have a loan in place for an extended period of time. Sometimes one institution will merge into another institution, also creating the need to alter your payment stream. Although this doesn’t seem complicated, it helps to have a game plan of what to look for and what steps to proactively take if your mortgage holder sells the loan.
Your Rights as a Consumer
It’s not uncommon for property owners to receive a notice that their loan “servicing” is being transferred to another company. Servicing is the collection of monthly mortgage payments. If your loan payment is also setup with an escrow (aka impound) account for taxes and insurance, your servicer will disburse those payments on your behalf as well.
These transfers are often smooth, but there are steps you can take to help ease the transition for yourself. The last thing we want is to have any of your money temporarily misplaced “in the system.”
Consumers have government mandated protections relating to the servicing of home loans. These protections also cover loan transfers from one servicer to another. You can look up the protections afforded consumers on the government’s www.consumerfinance.gov website. The specific page addressing home loan servicing can be reached here.
It’s important to note, a new home loan servicer may not apply any late payment penalties, or report derogatory credit to the credit bureaus, for a period of 60 days from the date of transfer if you sent your payments on time to your old servicer.
This protection does not apply if you did not make your payments on time. The reason for this protection is that sometimes account set-up, in mortgage lingo the boarding of the loan to the new servicer’s systems, may be delayed and payments may have been forwarded or received prior to being able to be processed properly. It is the servicer’s responsibility to apply payments. It is YOUR responsibility to make payments in full and on time.
Automatic Payments May Need to be Cancelled
If you’re setup on autopay for your mortgage payment, we advise you to make sure you cancel the payment to your soon-to-be old servicer once you’ve made the last payment due to them. Save the final statement from your prior servicer as it will provide verification of outstanding mortgage balance, as well as the balance in the impound account for taxes and insurance. Also, the statement will show the total interest paid to that servicer for the current tax year for your records for filing your tax returns. You can match the last statement to the IRS form 1098 (mortgage interest paid) from your old servicer(s) when preparing your tax returns.
Double-Check Your New Servicer’s Loan Statement
After you ‘ve made your initial payment to the new servicer, verify the payment has cleared your bank account. Then, contact the new servicer to confirm payment has been applied to your account. If you have an impound account, ask what the balance is in the impound account before and after the payment to verify your payment has been applied properly. Prior servicers need to transfer unused escrow balances to new servicers, and new servicers need to apply these balances properly. Do not set up auto-pay until you’ve made one or two payments to your new servicer. Hold onto statements confirming the payments were properly applied in case you need to reference them at a later date.
Anyone who has an impound account for taxes and insurance should follow up when these balances are due. It will be crucial to verify each was paid on time and in full. You can confirm your property tax information as it is available on the county website in which your property is located. Contact your insurance company to confirm that you have a new servicer. You can also request to be notified when the payment has been made.
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