Dear LoanSafe,

I’ve been struggling to make my monthly payments with BofA and have been working on a loan modification for over a year. Just when I thought we were finally making some progress, I get a letter in the mail notifying me that my loan has been transferred to Nationstar. Why did they transfer my loan to another mortgage servicer?

Thanks in advance, Michael

Hello Michael,

This is a question we’re asked daily here in our forums and in today’s market, it’s a very common occurrence for a mortgage to be transferred from one servicer to the next. This doesn’t mean that the terms of your loan have changed or that the loan is re-amortized over a certain time period, the original terms remain intact – including the monthly payment and any past due amount. Don’t be alarmed when your mortgage is transferred, this may happen again several times throughout the course of the loan.

When you purchased the property and the loan was funded, you may think that the original lender will service your account for the life of the loan – this is simply not the case. In most cases, the servicer you’re making monthly payments to is not the actual company that owns your mortgage (i.e. the investor). Once originated, the loan will likely be sold on the secondary mortgage market and packaged into mortgage-backed securities and sold to investors, including Fannie Mae and Freddie Mac who currently own well more than half of all residential mortgage loans.

Mortgage Servicers and Their Responsibilities

The company you make your payments to (aka your mortgage servicer) handles the day-to-day transactions on your account – the actual owner of the loan rarely comes into play and you may never know who owns the loan, unless you ask. Mortgage servicers are responsible for collecting payments and properly crediting the funds to your account, managing escrow (if you have one) and all collections, as well as foreclosure proceedings.

If you have any complaints or concerns regarding your mortgage, send your servicer a “qualified written request” (QWR) addressing your concerns and they’re required to respond within 60 days of receipt. This is required under Section 6 of RESPA. You can find a QWR example here.

An escrow account is often established when obtaining a mortgage. This is an account held by the mortgage servicer that handles mandatory property taxes and homeowners insurance. Some borrowers choose not to have an escrow account, in this case, taxes and insurance are paid separately.

If you’re servicer established an account for you (which is many times done if you fall behind or obtain a loan modification), law requires the servicer to make these payments on time and ensure they are properly credited. After 45 days, you’ll receive a statement that itemizes the exact amount that will be paid over the next 12 months.

Servicing Transfer

Don’t be surprised if you get a notice one day informing you that your loan has been sold/transferred to another company – remember this is a common occurrence in the mortgage industry.

You should receive two notices during the transfer, one from your original mortgage servicer, the other from the new servicer informing you that they will now be handling the account. The first notice should come from your current servicer at least 15 days prior to the effective transfer date (the date your first payment is due to the new servicer), while the second notice will come from the new servicer approximately 15 days after the scheduled transfer date.