Understanding How Assignments of Mortgage Work

A mortgage can change hands after a home purchase, but the company that owns the loan and the company that collects the borrower’s payments are not always the same. A lender may sell or assign ownership of a mortgage, while the servicing rights may remain with the same company or move to another servicer. When servicing changes, the borrower generally receives new instructions for making payments. A transfer does not, by itself, rewrite the underlying loan terms.

If you need help evaluating how a mortgage fits into your finances, consider finding a financial advisor to work with.

Mortgage Assignment Basics

An assignment of mortgage transfers an interest in a mortgage from one party to another. The party transferring that interest is commonly called the assignor, while the recipient is the assignee. Mortgage loans can move between financial institutions as part of the secondary mortgage market, allowing lenders to replenish funds that can be used for additional lending.

An important distinction for borrowers is that transferring ownership does not necessarily transfer servicing. The owner has the financial interest in the loan, while the servicer handles functions such as collecting payments and managing the account. A borrower may therefore continue paying the same servicer even after ownership changes.

The assignment of mortgage document uses several pieces of information to accurately identify the specific mortgage that is being transferred. These generally include:

The name of the borrower
The date of the mortgage
The jurisdiction where it was recorded
The amount of money that was originally loaned
A legal description of the home or other property used as collateral to secure the loan.

Federal disclosure requirements depend on what is being transferred. When a covered party becomes the new owner of an existing mortgage loan, it generally must provide the required ownership transfer disclosure no later than 30 calendar days after the transfer, subject to applicable exceptions. The disclosure identifies information including the new owner’s name and contact information.

When responsibility for servicing moves between companies, federal rules generally require both companies to notify the borrower. Subject to certain exceptions, the company giving up servicing generally has to deliver its notice at least 15 days ahead of the change, while the company taking over generally has until 15 days afterward. A single combined notice can also be used when it is provided within the required timeframe.

Effects of Mortgage Assignment

A sale or assignment of the loan does not give the new owner the ability to simply replace the mortgage agreement with different terms. When servicing changes, federal rules specifically require the transfer notice to state that the transfer does not alter the loan’s terms or conditions except for items directly connected with servicing.

What borrowers notice most often is a change in how the account is administered. A new servicer can have a different website, mailing address, customer service system or payment process. Borrowers using automatic payments through a bank or credit union may need to update the payee information after checking the effective date in the servicing transfer notice.

Escrow administration can also affect the amount collected each month even though the mortgage itself has not been rewritten. A servicer may collect one-twelfth of the estimated annual escrow disbursements each month and may maintain an escrow cushion of no more than one-sixth of estimated annual payments, subject to the applicable rules. Changes in property taxes, insurance premiums or an escrow shortage can therefore affect the total amount due.

Borrowers should also distinguish a legitimate transfer notice from an unexpected payment request. Before changing a mailing address or electronic payment instructions, compare the new information with the transfer notice and contact the servicer using independently verified account information when something appears inconsistent.

Borrowers also receive temporary protection against payment-routing mistakes after servicing changes hands. For 60 days from the date the new servicer takes over, the former servicer cannot cause an otherwise timely payment to be considered late solely because the borrower sent it to the former company. This protection also prevents a late charge based only on that mistake.

Servicing transfers can also affect borrowers who are already seeking mortgage assistance. Federal rules contain requirements governing certain loss mitigation applications when servicing changes, so borrowers with an application in progress should keep copies of their submissions, correspondence and account records.

What to Do When Your Mortgage Is Transferred

First determine what actually changed. A notice may concern the owner of the debt, the company servicing the account or both. When servicing moves, use the notice to identify the date that responsibility changes and confirm which company should receive the next payment.

Check any automatic payment arrangement before the next due date. Borrowers who use their bank’s online bill-pay service may need to replace the old servicer’s payment information. After the first payment goes through, review the mortgage statement and bank account to confirm that the correct amount was received and applied to the loan.

Review the escrow balance as well. Compare the first statement from the new servicer with your previous statement, including the principal balance, interest, escrow balance and payment history. Keep the transfer notices and both statements in your records in case you later need to document an error.

You can also verify who owns your mortgage when that information is unclear. The CFPB says borrowers can ask their servicer for the owner’s name, address and telephone number. Fannie Mae and Freddie Mac also maintain online lookup tools for loans they own, while MERS provides a servicing identification system for participating mortgages.

Contact the servicer promptly when a payment is missing, a balance appears incorrect or the account shows an unexpected late charge after the transfer. Borrowers can have federal rights to submit a written request for information or a notice of error when servicing problems arise.

Bottom Line

Mortgage ownership and servicing can move between companies during the life of a home loan. An ownership transfer changes who holds the financial interest in the mortgage, while a servicing transfer changes who manages the account and collects payments. Borrowers should read transfer notices carefully, verify new payment instructions, review the first statement after a servicing change and keep records of the transition. Federal rules also provide a 60-day protection when an on-time payment is mistakenly sent to the former servicer after servicing changes.

Mortgage Tips

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Borrowers can find out whether and where their mortgage has been assigned through the Mortgage Electronic Registration Systems (MERS). This is an organization created by mortgage companies to track mortgage assignments. Borrowers can use a free online service provided by MERS to find out who owns their mortgage.