Nate is a Mortgage Loan Originator for a local bank with a degree in Finance, helping individuals make that big ticket purchase.
The mortgage process is a long, daunting process that can be very intimidating if you haven’t done your due diligence prior to starting the process. Your loan servicer is your main point of contact through the term of your loan, so it’s important that you check how the servicing of the loan will be handled prior to taking your loan out. Be sure that they have your best interest at heart, that they have good customer service and if possible, that they will service your loan throughout the term of the loan.
The Secondary Market
First thing first, your loan itself was most likely sold the day after you closed your loan (unless you have an 810 credit score and bought a $1,000,000 home). Most banks sell the loan itself on the secondary market (Freddie Mac/Fannie Mae) so that they can free up their money and loan to more people. Think of it this way—if you have $10 and you loan it out, you can’t make any other loans until you get your $10 back. But, if someone offered to give you your $10 back for a fee, but allowed you to make money for collecting the payments on that $10 and servicing that borrower you could make money and loan your $10 again to someone else. With that being said, it’s not the loan itself being sold that affects who you make your payments too, it’s when the servicing is sold that changes things for you the borrower.
Changing Loan Servicers
It’s important to note that there are a lot of scammers trying to get you to give them free money, so it is important that you know for sure who your new servicer is before you make any payments.
When your servicer changes you legally have to be notified far ahead of time. You can verify who your new servicer is by contacting MERS who’s number you can find through Google. MERS is a company that tracks loan servicers for borrowers for this specific reason. They will be able to tell you who owns your loan’s servicing rights.
Again, don't make any payments until you have verified your new servicer. Once your servicer has changed, it is federal law that the new servicer must give the borrower a 60 grace period before they can charge any late fees. So, take your time and make sure everything is right before you make a payment.
It is also worth mentioning that once servicing of your loan has officially changed, the old servicer no longer has any role with your loan. Your old servicer is officially out of the picture.
Mortgage Servicing FAQ’s
Will my interest rate change?
No, your original loan terms cannot be changed by any servicer.
I don‘t like my new servicer. What can I do?
Unfortunately, the only way to get a new servicer is refinance your loan through the servicer you want. (Just be sure they aren’t going to sell servicing)
Do I have to pay a fee for transferring servicers?
If servicing rights of your loan were sold, there is no cost to you as the borrower.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2019 Nate Robbins