Friday, January 10, 2014

Who owns my loan? The difference between Investor and Servicer (part 2)

In Part 1 we defined Servicer & Investor,

Investor: the owner of your mortgage/note (your Investor may change during the life of your loan). The Investor provides servicing guidelines which instruct the Servicer how to handle the loans owned by that particular Investor.

Servicer: the middle man between you and the Investor. Servicers are responsible handling all collection records, activities and communications with the Borrower. The Servicer reports to the Investor.

Servicing rights can also be sold and the loan is then transferred to the new Servicer. Under RESPA and Dodd-Frank, the Borrower must receive notice when a transfer of service takes place. Usually the Borrower will receive two notices; one from the current (and soon to be former) Servicer which will provide the date that the new Servicer will take over and the current Servicer will no longer accept payments, and the second from the new Servicer which will provide additional details regarding the new loan number, whom you can contact for questions and where to send your payments.

Your Mortgage Servicer may be required to provide modifications under certain programs. The Department of Justice and the Attorney Generals have a settlement with the five major mortgage Servicers which requires them each to offer a number of modifications, including modifications that reduce principal. These are often called “DOJ” or sometimes “AG” modifications.

The government HAMP program requires Servicers who accepted TARP funds to provide HAMP modifications to eligible borrowers. HAMP also allows Servicers to voluntarily participate in the program. The Servicer is responsible for contacting the mortgage Investors to solicit and encourage participation for those who may have restrictions on modifications that might otherwise prohibit a HAMP modification. Whether your loan is eligible for HAMP depends on whether or not the Servicer of your mortgage participates in the HAMP program. The only exception being: if your Investor is Fannie Mae or Freddie Mac then your loan is eligible for HAMP despite a non-participating Servicer.

Q. How does the transfer of service affect my loan modification application?

A. Similarly, a Borrower may benefit if their loan transfers from a Servicer that does not and is not required to participate in HAMP to a Servicer who participates in HAMP. However, if the new Servicer is not a HAMP participant, it must still evaluate and provide HAMP modifications to loans eligible at the time of transfer. We have seen a similar trend for DOJ Servicers transferring loans to Servicers outside of the DOJ settlement.
Unfortunately, although mortgage and payment records transfer to the new Servicer, a loan modification application will have to be updated and resubmitted to the new Servicer with the new loan number.
Q. What if my loan is transferred to a new Servicer during my Trial Modification?

A. The new Servicer should abide by the Trial Modification agreement or offer. Any borrower in this situation needs to make certain that their trial payments are being sent to the correct location and counted towards their trial requirements.

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