Mortgage sold to yet another servicer. What are my options?

Question

I purchased my first home back in June (roughly 2.5 months ago) with a smaller, but very reputable, mortgage firm in the area (Maryland). It has great reviews online, and everyone whom I know that has used them had a great experience. However, after my first mortgage payment, my mortgage was sold to a servicer in Texas, and after my second payment, it was again sold to a servicer in New Jersey.

This is where I get nervous. I know that selling mortgages is commonplace and good for the economy as a whole (to keep interest rates competitive), but my mortgage was sold to a company with, shall I say, less than stellar reviews. Without mentioning their name, a bit of Googling reveals a class-action lawsuit against them in 2014 for mortgage insurance kickback fraud and 243 complaints against them on the BBB. While bills.com rates them a 4.5 out of 5, 127 out of the 139 customer reviews rank them a 2 star (out of 5) or lower.

The company's website notes that they are "the 5th largest originator of retail residential mortgages, the 6th largest originator overall, and the 9th largest mortgage servicer." Last year (2014), they closed "approximately $36 billion in mortgage financing and maintained an average servicing portfolio of over 1,100,000 loans." Part of me knows that these 127 horrid reviews are simply the most vocal of the customers, and most likely in the extreme minority, but I can't help but to be concerned.

I am in good financial standing and plan to always pay my mortgage on time (with additional principle) each month, but I am still nervous for the worst. I never would have applied for a mortgage with this company if I had known it would end up in the hands of this particular servicer, so what are my options now?

Forgetting the hassle of needing to change where I send the checks each of the first 3 months, I'm concerned about my long-term financial health. Are my mortgage terms locked in? Who oversees this? Re-financing with another bank doesn't seem like a good option after only 2 months of a low rate, 30 year fixed-rate loan.

Answer 1

Are my mortgage terms locked in? Who oversees this?

Yes your terms like rate, balance, penalties, due dates, are all covered in the mortgage documents. Those will not change. If the mortgage is an adjustable or has a balloon payment those terms will be followed by the new company.

That being said, mistakes can be made. Double check everything. I had a transfer get messed up once, and all the terms were wrong. It took a few months but everything was worked out. In fact because they first tried to stonewall me I was able to negotiate some additional concessions out of them.

Running your own escrow account is one thing you always want to do. That makes sure that the taxes and insurance are always paid by you, even if the servicing company has a glitch. Generally you have to have enough equity to not have PMI in order to get them to agree to the self-escrow option.

If you have a problem with the servicing company then contact the Consumer Finance Protection Bureau a part of the US Government. They have only been a round a few years, thus I have no experience with them.

Have an issue with a financial product or service? We'll forward your complaint to the company and work to get a response from them.

The last few times I applied for a mortgage or refinanced a mortgage the lender had to reveal as part of the application stage the percentage of recent mortgages they still own/service. Check those numbers the next time you apply.

Answer 2

Your mortgage terms are locked in; the servicer/new owner cannot change the terms without your consent, but the servicer can be more aggressive in taking action (as specified in your mortgage contract) against you. For example, if the mortgage agreement calls for penalties for missing a payment or making it late, your friendly neighborhood banker might waive the penalty if the payment is received a day late once (but perhaps not the second or the third time), but the servicer doesn't know you personally and does not care; you are hit with the penalty right away. If the payment was received a day late because of delays in the post office, too bad. If you used a bank bill payment service that "guarantees" on-time arrival, talk to the bank. All perfectly legal, and what you agreed to when you signed the contract. If you can set up electronic payments of your mortgage payments, you can avoid many of these hassles.

If you are sending in more money than what is due each month, you should make sure that the extra money reduces the principal amount owed; easy enough if you are sending a physical check with a coupon that has an entry line for "Extra payment applied to principal" on it. But, the best mortgage contracts (from the bank's point of view) are those that say that extra money sent in applies to future monthly installments. That is, if you send in more than the monthly payment one month, you can send in a reduced payment next month; the bank will gladly hold the extra amount sent in this month and apply it towards next month's payment. So, read your mortgage document (I know, I know, the fine print is incomprehensible) to see how extra money is applied.

Finally, re-financing your mortgage because you don't like the servicer is a losing proposition unless you can, somehow, ensure that your new bank will not sell your new mortgage to the same servicer or someone even worse.

Answer 3

You would need to check the original mortgage papers you signed with the originators. Chances are you agreed to allow the mortgage to be sold and serviced by other parties.

Refinancing would also put you in the same boat unless you got them to take that clause out of the mortgage/refinance papers. Also, chances are most small banks and originators simply can not keep mortgages on their books.

There are also third parties that service loans too that do not actually own the mortgages as well. This is another party that could be involved out of many in your mortgage.

I would also not worry about 127/139 complaints out of 1,100,000 loans. Most probably were underwater on their mortgage but I am sure a few are legitimate complaints. Banks make mistakes (I know right!).

Anyway, good luck and let me know if you find out anything different.