Hello & Goodbye – Lenders Selling Loans or “What Happens if my Loan is Sold?”

You’re sitting at the closing table, your lender (if you’ve wisely chosen a good, local lender) is sitting at the table and the attorney tells you that your loan is likely to be been sold by the time you make your first mortgage payment.

What?  I know the answer, but I know Matt Hodges with Presidential knows a more detailed and better answer than I do, so I asked him to write the following for you.

During the process of obtaining your mortgage, you may be told that the loan will be transferred to another servicer.  What does “servicer” mean?  Well, servicers are companies that receive your mortgage payments, put some of it into escrows to pay taxes and insurance, send most of it off to the investor who put up the money for the mortgage and keep a bit of it themselves for servicing the loan. 

When a loan is being sold

The homeowner is sent a Notice of Assignment, telling them who the new servicer is that they will pay.  This happens because many correspondent lenders don’t service loans, they only originate, close and fund them and often this happens very quickly after closing.  Servicing changes also can happen during the life of an existing loan simply because servicers change their business model.  Instead of a little bit of income each month, they may prefer to sell the servicing rights for immediate cash.  The new servicer buys that mortgage in order to have an income flow going forward.

If your loan is sold (here’s where the risky part could come into play)

Your current servicer must send you a Notice or “Good Bye” letter, detailing when the transfer will happen, which company your loan will be transferred and how long you can continue to pay the “old” servicer before you are required to send checks to the new one.  At the same time that Good Bye letter is sent, the new servicer sends a “Hello” letter with virtually the same information.  This is your check that the transfer is legitimate.  Wait..what?

Well, since mortgages – in Virginia called Deeds of Trust – are public records, anyone can head down to the records room of their local courthouse and research them.  They could see that you just closed on a new house, with a mortgage to Local Bank Mortgage.   Now, a crafty criminal might know that Local Bank Mortgage originates mortgages and does not service them.

So, if timed correctly, a criminal could send the unsuspecting home owner a Notice that their mortgage has been sold to Untrustworthy Scam Mortgage Company.  If the homeowner looked past the name, they’d see all of the correct data from their loan and perhaps believe that their loan had been sold.  In fact, didn’t their loan officer tell them the loan would be sold?  Yes, he or she did.  Now, the home owner is paying Untrustworthy Scam Mortgage Company for a couple of months and wait….my loan is being sold from Local Bank Mortgage to Big National Lender?  How is that possible, the home owner wonders?

The moral of the story

Trust that the notices are accurate, but verify through independent means, like receiving BOTH “Hello” and “Goodbye” letters or calling your loan officer.  Most of the time, your loan officer can also tell you what your loan’s status is. 

From Jim – thanks, Matt!

 

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