What happens if your mortgage is sold to a new company, without you knowing about it?
A common complaint from homeowners is that they signed up for a mortgage with a specific bank and pay their mortgage a certain way, and then a few months later, they get a notice that a different bank now owns their mortgage.
Has this happened to you? You may find that that you paid your mortgage online but now have to send in payments via regular mail. Or, you have to log in to a different company’s web site in order to pay online. It can be extremely frustrating and cause anxiety.
Confusion around how to pay your mortgage causes stress that you will unintentionally miss a payment. And, often the new company isn’t a big brand name like the bank you did business with but a name you’ve never heard of.
How does this happen?
In a nutshell, most banks don’t own mortgages. That is, they don’t lend you the money and then wait for you to pay it back directly to them. 90% of mortgages in fact are “owned” by the federal government. What happens is that you get your mortgage from, for example, Bank of America, and then they sell it to Fannie and Freddie, which are run by the United States government.
Bank of America may still collect your money – that’s called “servicing” your mortgage – or they may sell the servicing rights to another company, in which case you’ll get notified of a new company to make your mortgage payments to.
Some banks keep your mortgage and also service your mortgage, but this is the exception rather than the rule.
Banks generally try to get your mortgage off their books as soon as possible. And, the servicing rights to your mortgage can be sold several times over the years you have your mortgage.
What can you do about it?
Unfortunately, you can’t do anything about it. Banks can sell your mortgage and they can sell the servicing rights to your mortgage.
One thing you can do to protect yourself, however, is do a little research online searching for any problems other people have had with the new servicing company. That way, you can get a sense of what types of problems people are reporting.
Recently, the Consumer Financial Protection Bureau made a lot of new rules for servicing companies because there were a lot of customer complaints.
What to watch out for
One of the top complaints from consumers about servicing companies was a lack of information when mortgages were transferred from one company to another. This can result in payments being applied to the wrong company around the time of transfer. What you can do is to verify that your payment has been applied to right company it should have been applied to, given the date that the new company started servicing your loan.
Another complaint is that communication with servicers is difficult. Consumers have reported issues with being given confusing information when they have contacted servicers. What you can do is report any of these problems directly to the Consumer Financial Protection Bureau. File a complaint.
You will also want to keep a close eye on whether your principal payments are being properly applied to paying down your loan balance, and I would recommend that you read your statement carefully every month, especially when your loan is sold to make sure there are no errors. It is much easier to address errors the more recent they are!
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