One of the biggest annoyances in the wake of the mortgage and banking crisis has to do with mortgage service companies. These specialized firms are usually third party businesses that are hired by banks and mortgage lenders to take care of the details of serving the accounts of people who take out home loans. Unless you do business with a very small and localized lender, for example, chances are that your monthly statements, your escrow account, and other vital aspects of your mortgage are handled by a contracted servicing company.
But when banks sell their mortgages to other investors or lenders, a phenomenon that is very common these days, they usually terminate their arrangement with the mortgage servicing company. The next owner of the mortgage paper hires their own servicing company. That means that if you have a mortgage for many years and it is bought and sold multiple times you will likely wind up changing mortgage service companies several times.
Lately that kind of musical chairs scenario has become even more prevalent, because loans are moving around faster than ever before in a global financial marketplace where investments rapidly change hands. It is not unusual, for example, to take out a new home loan and then experience a change in your servicing company even before you make the first payment.
The problem is that many homeowners are puzzled about how to deal with situations that arise when these handlers of mortgage accounts suddenly change. So here are some insights that may help.
What to Expect:
If your mortgage company does sell your loan – or if your bank is acquired by another financial institution – then you will likely get a new mortgage servicing company. Your lender should notify you about two weeks in advance of the transfer, and the new company servicing your mortgage should notify you within a couple of weeks of receiving your account.
Making Loan Payments:
In the meantime, you may not be sure where to send your monthly payment. But if you accidentally send it to the old mortgage servicer don’t worry about it. As long as you made the payment on time it should get credited to you without any problems. Even if you pay it late – because you weren’t sure where to send it – you should be given a special grace period. During that time you won’t be charged a late fee or penalty.
Payment Grace Period:
These grace periods typically last for 60 days. While you don’t want to abuse the grace period, it does provide a safety net by allowing you time to sort things out and direct your payment to the right place. But if you inadvertently mailed it to the old address, don’t panic. That old service company is responsible for forwarding it to the new one.
One of the biggest causes for concern is escrow accounts, where your money is set aside in reserve to pay for critical obligations such as homeowner’s insurance and property taxes. The mortgage servicing company is responsible for accounting for that cash and also for making the corresponding payments on time. Keep track of your printed statements during the changeover period, and if you spot any errors or discrepancies report them to the mortgage service company
You should always double check your monthly and annual statements to ensure that the data is correct – including such things as your contact information and record of payments. If you have a complaint, however, don’t hesitate to contact the mortgage servicing company. If they are not cooperative then you can forward your complaint to your local or national consumer protection agencies.