A mortgage servicer is the company handling the servicing of your loan. A federal rule, 12 CFR 1024.33, sets what happens when that servicing is assigned, sold or transferred to another company.
The notice and its timing
Under paragraph (b)(3)(i), the old servicer, called the transferor, generally has to give you the notice of transfer at least 15 days before the effective date. The new servicer, the transferee, has to give its notice no more than 15 days after the effective date. The two may send a single notice, and that one has to be provided at least 15 days before the effective date. Under (b)(3)(iii), notices provided at settlement by both servicers satisfy the timing requirements. Under (b)(3)(ii), the notice can come from either servicer up to 30 days after the effective date when the transfer follows a for-cause termination of the servicing contract, bankruptcy proceedings for the servicer, or FDIC or NCUA proceedings for the servicer or an entity that owns or controls it.
What the notice has to say
Paragraph (b)(4) lists the effective date, the name, address and a collect call or toll-free number for both servicers, the date the old servicer stops accepting payments and the date the new one starts, which have to be the same or consecutive days, and whether the transfer affects mortgage life or disability insurance or any other optional insurance and what action you must take. It also requires a statement that the transfer doesn’t affect any term or condition of the loan other than terms directly related to servicing.
The 60 days
Paragraph (b)(2)(i) excludes transfers between affiliates, transfers resulting from mergers or acquisitions of servicers or subservicers, and transfers between master servicers without changing the subservicer, if there is no change in the payee, payment address, account number or amount of payment due.
Transfers that need no notice
Paragraph (b)(2)(i) excludes transfers between affiliates, transfers resulting from mergers or acquisitions of servicers or subservicers, and transfers between master servicers without changing the subservicer, if there is no change in the payee, payment address, account number or amount of payment due.
Who to ask
I can’t give legal advice. Your lender can say how this rule applies to your loan.
Questions
Common questions
How much notice do I get when my mortgage servicer changes?
12 CFR 1024.33(b)(3)(i) generally has the old servicer provide the notice of transfer at least 15 days before the effective date. The new servicer's notice is due no more than 15 days after the effective date, and a single combined notice has to be provided at least 15 days before. Under (b)(3)(ii), a transfer that follows a for-cause contract termination, a servicer bankruptcy, or FDIC or NCUA proceedings can be noticed up to 30 days after the effective date.
Can a payment be late if I send it to the old servicer after the switch?
Under 1024.33(c)(1), for 60 days starting on the effective date of the transfer, a payment the old servicer receives on or before the due date, including any grace period allowed under the loan, may not be treated as late for any purpose.
What happens to a payment the old servicer receives by mistake?
Under 1024.33(c)(2), the old servicer has to promptly either transfer the payment to the new servicer or return it to the person who made it and notify them of the proper recipient.
Written by Diana Yeji Kim — REALTOR® at eXp Realty, serving Greater Boston in English, Korean, and Japanese.
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