If you’ve ever taken out a mortgage, there’s a good chance the lender who made the loan to you sold it to another bank or investor before you made your first payment. There’s also a good chance that if you’ve had your mortgage for a few years, it may have been sold at least one or two more times. Why all the paper shuffling? The answer is fairly straightforward.
Lenders typically sell loans for two reasons. The first is to free up capital that can be used to make loans to other borrowers. The other is to generate cash by selling the loan to another bank while retaining the right to service the loan. Cash is generated when the old lender charges the new lender a fee for collecting and disbursing the monthly payments. In the end, your loan could be owned by lender “B”, while you make payments to lender “A.”
On a personal note, I once obtained a mortgage loan from one of the local community banks here in Las Cruces. I was informed at the closing that my loan had already been sold to what financial guru Clark Howard calls a Multi Mega-Bank. In turn, the MMB sold the loan to the General National Mortgage Association (Ginnie Mae). Until the mortgage was paid off, I continued to make my monthly payments to the MMB, who retained the servicing rights, even though Ginnie Mae was the owner of my loan.
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Federal law protects borrowers when loans are bought and sold by requiring that both the old and new lenders notify you in writing within 15 days of a sale that a transfer has taken place. The letters should provide the name of the new lender, how and where payments can be made, and when your next payment is due. You should continue making payments to your old lender until you receive the letter from the new lender. While the loan is being transferred, borrowers are afforded a 60-day grace period that prohibits the new lender from collecting late fees or declaring a loan delinquent. In addition, the terms of your original mortgage are set in stone and cannot be modified by the new lender or servicer.
If payments are not credited properly or some other issue arises during or after the transfer, it’s up to you to pursue a remedy in a timely manner. Step one is to notify the new lender in writing. The letter should be addressed to the customer service or other department designated by the lender to receive correspondence and should not be included with your regular monthly payment. The lender is required to respond within 20 days of receiving your letter. Lenders also have 60 days to resolve the problem if the issue requires extraordinary efforts to investigate.
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Not satisfied with your lender’s response? Step two is to file a complaint with the Consumer Financial Protection Bureau, or CFPB (www.consumerfinance.gov). The CFPB requires that your lender address the complaint within 15 days of when they receive notification from CFPB. Complaints having to do with fraud, unfair business practices or identity theft can be filed with Federal Trade Commission (www.ftc.gov/complaints) or the New Mexico Attorney General’s office (www.nmag.gov/file-a-complaint.aspx).
So, who owns your mortgage? There are three ways to find out. First, call or write to your servicer. Most have a secure email option on their website through which you can ask. I did just that while doing research for this column and received a response within 30 minutes. You can also ask Freddie Mac (www.freddiemac.com/mymortgage or 1-800-FREDDIE) and Fannie Mae (www.knowyouroptions.com/loanlookup or 1-800-2FANNIE) if they own your loan.
If all else fails, contact the folks at Mortgage Electronic Registration Systems, Inc. (www.mersinc.org or 1-800-679-6377). MERS Servicer ID is a free service that provides information on the current servicer and investor (owner of the note) for loans registered on the MERSSystem.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or [email protected].
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