Mortgage Sale No Cause For Alarm

Peter G. Miller
OurBroker®

Millions of loans are outstanding, including a large number sold each year from one lender to another. If it happens that your loan is among those sold, worry not -- Uncle Sam makes the process safe and protects your interests.

Your mortgage may be a debt to you, but in the world of mortgage financing it's an asset to lenders and also to those who "service" loans -- the companies that collect payments, pay property taxes, and administer mortgages.

It used to be that when loans were sold or new servicers named, it was the borrowers who were often the last to know. The result was that payments were sent to the wrong address, late fees were assessed, and credit reports needlessly dinged.

But today it's understood that borrowers have rights under RESPA -- the Real Estate Settlement and Procedures Act. Now when a mortgage is sold or a new company is named to provide servicing, it's the lender's job to provide proper notice and instructions. No less important, federal law prohibits some of the abusive practices of the past.

To start, when a loan is sold it does not mean the terms can be changed. Your mortgage is a contract between you and the lender, and the fact that a new lender or servicer is in the picture does not mean the interest rate, monthly payments or any other loan conditions will be altered.

What can change is where you send your check. A new lender or servicer typically means a new payment location and the result is that when loans or servicing change hands, borrowers must be told in writing about new payment addresses and account numbers.

Under RESPA, there is a 60-day period after the transfer date during which you can send payments to the old lender. If the payments are timely, the new lender cannot impose a late fee. In essence, the idea is not to encourage payments to a wrong address, but to provide a reasonable transition period.

Also under RESPA, when a mortgage is transferred you have a right to file a "qualified written request" to your lender concerning any loan issues. A "qualified written request" is generally a letter from you and not just the lender's payment form, a letter which must include your name, account number, and specific concerns. The letter is probably best sent by certified mail with a return receipt requested. The lender then has 20 business days from delivery to acknowledge your request.

Once your request is received, the lender has 60 business days to correct any errors in the account or to clarify any questions.

Do lenders take such requirements seriously? You bet. A lender who fails to follow RESPA guidelines can face individual and class-action lawsuits.

Question Of The Week

Q I co-signed a credit card account with a friend. The initial line of credit was $5,000. It has now been raised to $7,000 -- without my request. I now feel the level is too high and no longer want to be a co-signer. What should I do?

A In terms of mortgage borrowing, lenders will see a credit card balance you have co-signed as a debt -- but some may not count it against you if you have not made payments in the past 12 months -- ask lenders for details.

If the credit limit has been raised then is it still necessary to be a co-signer? Perhaps the time has come to pay off the balance, cancel the joint card, and for your friend to get one independently. Call the credit card company to see what must be done to cancel the card. If they need a letter, use certified mail with a return receipt so you have evidence showing when your letter was delivered.

Your friend, the co-signer, might want to know that credit card companies often issue new cards to pay off debt balances from other credit card companies....

Weekly Resource

Much has been said about the privacy rights of children online. The Federal Trade Commission has now proposed a rule which would limit the right of Web merchants to collect information from children. Those with an interest in the rule can comment by sending e-mail to the FTC.

Published: April 27, 1999

Use of this article without permission is a violation of federal copyright laws.

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Editor's Note: This article reflects the opinions of Peter G. Miller only and not necessarily the views of this or any other publication, organization or Website owner.

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