Your Mortgage Loan Servicing Rights: What You Need To Know

IN THIS ARTICLE:

• When Is Your First Payment Due?
• When Will You Know If Your Servicing Will Be Transferred?
• Other Critical Notes About Your Loan Servicing Rights

After you close on your mortgage, you'll start receiving monthly statements that you need to pay to remain in good standing on your loan. The lender that sends you these statements and handles all of your ongoing inquiries is known as the loan servicer.

The loan servicer can be different from the lender who made your loan originally because lenders have the right to sell servicing on loans they make to other lenders who then take over the servicing.

This can happen right after you close your loan, or at any time while your loan is outstanding.

Below is an overview of the key points you need to know about loan servicing.

When Is Your First Payment Due?

Mortgage payments are due the opposite of how rent payments are due. When you pay your January rent on January 1, you're paying forward until January 31. But when you pay your January mortgage payment on January 1, you're paying for mortgage interest that accrued December 1-31.

So if you closed on a new mortgage December 15, you'd be required to pre-pay interest on the new loan for December 15-31. In other words you're being required to pre-pay your January mortgage payment, and as such, your first mortgage payment wouldn't be due until February 1.

This same principal applies to any month regardless of when you close during the year.

When Will You Know If Your Servicing Will Be Transferred?

On October 3, 2015, the federal government required that all lenders must use the same mortgage disclosures.

The first disclosure lenders must give you within three days of your application is a three-page document called the Loan Estimate, and at the bottom of page three, there is an item called 'Servicing' which reads:

We intend

to service your loan. If so, you will make your payments to us.

to transfer servicing of your loan.

The lender is required to deliver the Loan Estimate to you with one of these boxes checked, so you'll know whether your lender will keep or transfer servicing of your loan within three days of your application.

If the lender checks the box that says they will transfer servicing of your loan, then a disclosure you'll sign with all of the other final closing documents will tell you which lender they are transferring the servicing to. This document is called the Servicing Disclosure Statement, which is discussed in more detail here.

Other Critical Notes About Your Loan Servicing Rights

• Your loan term and rate won't change with a servicing transfer.
• Mortgage payments are always due on the first of each month, and you always have 15 days into each month before you get charged a late fee. The late fee is five percent of your mortgage payment. Paying past day 15 of any month won't hurt your credit -- the lender won't report a late payment to credit bureaus until you're 30 days late or more.
• For exact details on laws that protect you from accidental late payments during loan servicing transfers, read: Why Did My Lender Sell My Mortgage?