Your Mortgage Servicer Is Changing: Why This Matters and What to Do
Updated May 2, 2024 at 10:35 am
When you take out a home loan, you expect that mortgage to be with you long term. Most mortgages come with a term of at least a decade, and a 30-year term is common. But that doesn’t necessarily mean you’re in a long-term relationship with your mortgage servicer.
You don’t get to change your mortgage servicer—the company you send your mortgage payments to—unless you refinance with a new lender. But the servicer could sell your loan to a different company. At that point, you’ll need to figure out how to work with the new company to get your payments in on time.
This can be a headache for borrowers, but when you know what to expect, it gets a little easier.
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Vault’s Viewpoint
- It’s fairly common for your mortgage to change servicers and it may happen several times over the life of your loan
- The terms of your loan shouldn’t change when it moves to a new mortgage servicer
- Mortgage lenders sell servicing rights because doing so allows them to make more profit faster and with less risk
Understanding the Secondary Mortgage Market
When a company issues you a mortgage, it plans to make some money. In some cases, that means staying with you through the life of your loan and collecting the interest due with all of your payments.
But there are other ways lending institutions make money off mortgages. Sometimes, they package up a bundle of loans and sell it to a new buyer. This happens on the secondary mortgage market.
This practice of selling home loans to a new mortgage servicer is fairly common. By some estimates, 30% to 50% of people with a mortgage will get assigned to a new servicer at some point.
So how do you know if your loan was sold on the secondary mortgage market? If you get notified that a new company is taking over your mortgage, it means that your loan’s servicing rights were sold.
Why Lenders Sell Mortgages
The lender that gave you a mortgage benefits from selling your loan by recouping everything they lent you, usually with a little extra on top. Plus, they offload risk. By selling your loan, they eliminate the possibility they’ll stop making money if you stop making your payments.
The investor, financial institution or other player who buys your loan stands to gain from the interest you’ll pay over time.
All of this keeps the mortgage market moving. Lenders aren’t stuck waiting 30 years to make money from loans. This increased liquidity makes it easier for them to issue new loans, ultimately benefiting homebuyers.
What Happens When Your Mortgage Changes Hands
Here’s the good news: the new mortgage servicer is the only thing that’s changing. The terms of your loan—from how long you have to repay it to how much you pay monthly to your interest rate—stay the same.
The main hassle with a new mortgage servicer comes from the need to redirect payment. For example, if you have autopay set up with your old mortgage company, you’ll probably need to set that up again with the new company. That said, some servicers have started to move over key details like ACH transfer information.
And you might want to act fast here. The old and new servicing companies are only required to give you 15 days of notice before the new mortgage servicer takes over.
That doesn’t mean you can get penalized if you’re slow to make the change. If you accidentally make a payment to your old mortgage servicer, they should redirect it to the new company (confirm this, though). And law dictates that if you’re late to pay your new servicer in the first 60 days after the transfer, they can’t charge you a late fee or treat the payment as late (affecting your credit score). So there’s some good cushion built in for borrowers swapping to a new mortgage servicer.
Tips When Changing to a New Mortgage Servicer
If you were recently notified that your mortgage servicer is changing hands, you can take some steps to make this transition as problem-free as possible:
- Note the first date when payment is due to your new servicer. Generally, it will be the first due date after you get notified of the change. If you get a letter in the mail notifying you in mid-March, for example, you’ll probably need to make your first payment to the new mortgage servicer on April 1.
- Set up payment with the new servicer as soon as possible. If you like to autopay your mortgage, for example, get that established with the new company. Or if you usually mail a check, figure out the new address to send it.
- Double-check your first payment. Confirm that you can see that the money has left your account and that the new servicer has received it.
- Make sure everything transfers over. You probably have some money built up in your mortgage’s escrow account to pay for taxes and insurance. Double-check that the full amount gets transferred over to the new servicer.
- Add the new servicer to your contact list. You don’t want any mortgage notifications to end up in your spam folder.
- Look into your home insurance. In some cases, you’ll need to change the mortgagee clause to include the new servicer’s info.
A new mortgage servicer can mean some added work. But sometimes, if you’re lucky, your servicing rights will get sold to a company with better customer service and a much more functional website.
Frequently Asked Questions
Can I Prevent My Mortgage From Being Sold?
Usually, no. This practice in the mortgage industry is legal and widespread. In fact, you’ll likely find a clause allowing it in the terms and conditions of your mortgage contract. That said, if your current lender sells your servicing rights to a new company, it shouldn’t change anything other than where you send your monthly payments. All of the terms of your loan have to stay the same.
How Many Times Can A Mortgage Servicer Change?
There’s no limit in place. While servicers have to comply with certain regulations around factors like how much notice they give you, they can technically sell your servicing rights whenever they want. And the company that buys them next can do the same.
Why Does My Mortgage Servicing Company Keep Changing?
It has nothing to do with you as a borrower or your specific loan. Instead, it just means that your previous servicer saw benefit in selling, and other entities were interested in purchasing your servicing rights.
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