Very few lenders hold on to a mortgage loan. Most lenders sell the servicing rights to the mortgage to a third party loan servicing company within a relatively short period of time. A lot can happen during this transfer and you as a borrower need to pay attention when you receive notification that your loan is being sold.
I have talked to quite a few borrowers who complain that a late payment was reported to the credit bureau during the loan transfer, or they were erroneously charged late fees. The result of the late payment of course is your credit score suffers. Then it becomes a whole different story which could end up costing you big time when you apply for additional credit. However, the law is on your side, according to the Federal Trade Commission (bold and other formatting mine):
There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer.
In addition, the fact that your new servicer may have received your payment late as a result cannot be reported to a credit bureau.
This is huge and that is why you need to pay attention when the loan is being transferred from one servicer to another. I suggest you do the following during the loan transfer process:
- Keep all the paperwork you receive from the original servicer and the old servicer.
- Make sure you send an on-time payment to the exact address and if you mail a check don’t forget to account for weekends and federal holidays.
- Keep a copy of the check you mailed.
- If your payment is not processed within a reasonable period of time (a week), call the number provided.
- When talking to the company keep notes and be sure to ask for names, contact numbers and reference codes.
The FTC website has a lot of information on how you can protect yourself as well as ensure the loan transfer process goes as smoothly as possible. There are many things that can destroy your credit score but a screw up by the loan servicer shouldn’t be one of them.
