Mortgage Loan Servicing Rights Overview
After closing on your mortgage, monthly statements will be sent to you. These statements are necessary to maintain good standing with your loan. The loan servicer is the lender who sends these statements to you and takes care of all your ongoing questions.
Because lenders can sell servicing on loans to other lenders, the loan servicer may be different than the original lender who originated the loan.
This can occur immediately after closing your loan or anytime while your loan remains outstanding.
Here is a summary of key points to remember about loan servicing.
When Is Your First Payment Due?
The reverse of rent payments is true for mortgage payments. You pay forward January 31 if you pay January rent. However, if you make your January mortgage payment on January 1, then you are paying mortgage interest accrued from December 1-31.
If you close on a mortgage on December 15, you would be required to prepay interest on the December 15-31 loan. This means that you will need to prepay January's mortgage payment. Your first mortgage payment will not be due until February 1.
The same principle applies to all months, regardless of the time you close it during the year.
How Will You Know If Your Service Is Being Transferred?
The federal government mandated that all mortgage lenders used the same mortgage disclosure on October 3, 2015.
A three-page document called the loan estimate is the first disclosure lender must provide you with within three days of your application. At the bottom of page three is an item called "Servicing," which reads:
We are planning
To service your loan, please use [ ] If you are sure, we will send your payments.
To transfer servicing of your loan, please use [ ]
You must have the Loan Estimate delivered by the lender to you. Make sure you check one of these boxes to find out if your lender will transfer or keep servicing your loan within three business days of you applying.
If the lender ticks the box that they will transfer servicing of the loan, then you will receive a disclosure along with all the closing documents. This will let you know which lender they will be transferring the servicing to. The Servicing Disclosure Statement is this document.
Important Notes About Your Loan Servicing Rights
A servicing transfer won't affect your loan rate or term.
Mortgage payments are due every month on the first day of each month. You have 15 days to pay any late fees before they start. The late fee equals five percent of the mortgage payment. Your credit won't be affected if you pay past the 15th of any month. The lender will not report late payments to credit bureaus unless you are 30 days or more behind.
