When you were going through the home-buying process, choosing a mortgage company was a big part of that. You likely did painstaking research on each company and carefully considered loan offers before deciding on one.
Despite all that hard work, your mortgage servicer — the company that collects your monthly payments — can change. And there’s not much you can do about it. If you receive a notice that your mortgage has been sold to a new servicer, here’s what you need to know about the transition.
Why mortgages sometimes change hands
It’s quite common for mortgages to be sold. One day, you might find a letter in the mailbox from your mortgage servicer stating that your mortgage has been sold. Mortgages servicers sell loans for several different reasons, including:
- To raise capital: Because mortgages are often repaid over the course of decades, loan servicers would be strapped for cash if they tried to manage every mortgage themselves. Instead, they bundle a group of them together and sell them to other servicers or investment companies to raise capital.
- The company is closing: Some loan servicers close, or merge with other servicers. To complete the transition, they sell the current mortgages to other servicers.
- They’re switching their focus: When a company decides to focus on another area of business, such as commercial real estate, they’ll sell off their existing portfolio.
If your loan servicer sells your mortgage, it’s nothing personal against you. It doesn’t say anything about you or the home you bought. It’s simply a business decision.
How to handle the transition
Here’s how to handle your mortgage being sold to a new servicer.
1. Pay attention to notices
Many people don’t pay enough attention to their mail. They’ll skim through it and toss letters or notices from companies they don’t recognize. However, that’s a big mistake. If you have any type of debt, including mortgages or student loans, your loan servicer will typically communicate solely through the mail. If you’re not careful, you could miss out on important notifications.
Get in the habit of opening every piece of mail that arrives to ensure you have the latest information on your mortgage and other financial accounts.
2. Check your credit report
It’s possible to miss a notice. You could accidentally toss a letter from your loan servicer, or it could even be lost in the mail.
That’s why it’s so important to check your credit report on a regular basis. Your credit report lists all of your current and past debt, including your mortgage. It lists who you currently owe money to, as well. By checking it every four months — you can access a free credit report from each of the three credit bureaus every year — you can see if your loan servicer changed. Check your credit report for free at AnnualCreditReport.com. (See also: 2-Minute Read: What You Need to Know About Credit Reports)
If you see that your loan servicer changed, call the loan servicer and ask for more information, such as payment details and when the transition officially begins.
3. Confirm with your original servicer
Unfortunately, mortgage scams are common. If you get a notice saying that your mortgage has been sold to a new loan servicer, check with your original servicer by calling them directly before sending in payments to the new one. By double-checking, you can eliminate the risk of getting scammed and giving a fraudulent company your money. (See also: Why You Should Call Your Mortgage Lender Every Year)
4. Keep up with your payments
Your notice should detail when the transition is finalized and who you need to make payments to going forward. During the transition, it’s important to keep making payments to your old servicer until the loans officially transfer over, or your credit score could drop. If you’re unsure about who to make payments to, contact your new loan servicer. (See also: How to Boost Your Credit Score in Just 30 Days)
5. Maintain excellent records
Loan transitions can be overwhelming, so keep receipts of all your payments. And if you speak to a representative from your loan servicer, keep notes on the date, time, and the name of the person you spoke with in case there are any problems.
What to expect from the new company
Although your loan can be sold at any time without your consent, a sale doesn’t change the terms of your loan. Your new company can’t reduce your repayment term, for instance, or adjust your monthly payment. The only difference you’ll notice is the name of the company you write on your checks.