Making Sure Your Mortgage Loan Payments Count

When you apply for a mortgage loan, you may think that the same lender will service your loan until you pay it off or sell your house. But today home loans - and the rights to service them - are often bought and sold.

Your home may be one of the most expensive purchases you ever make, so know who is handling your payments and that your mortgage account is properly credited. If your loan is sold, there is a 60-day grace period. During this time you can't be charged a late fee if you mistakenly send your mortgage payment to the old servicer. Even if your new servicer received your payment late as a result, it can't be reported to a credit bureau.

Mortgage Loan Servicers: Escrow Accounts
An escrow account is a fund held by your mortgage loan servicer into which you pay money to cover charges for property taxes and homeowners insurance. The escrow payments typically are included as part of your monthly mortgage payments. The servicer is responsible for paying your taxes and insurance as they become due during the year. If you don't have an escrow account, you are responsible for paying your own taxes and insurance.

The Real Estate Settlement Procedures Act (RESPA), enforced by the U.S. Department of Housing and Urban Development, is the major law covering escrow accounts. If your mortgage servicer administers an escrow account for you, the servicer is required to:

Make escrow payments for taxes, insurance, and any other charges in a timely manner.
Give you a statement within 45 days that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and totals of those payments.

Give you a free annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, and other charges.

Transfer of Servicing
If your loan is about to be sold, you generally get two notices: one from your current mortgage servicer; the other from the new servicer. Usually, your current servicer must notify you at least 15 days before the effective date of the transfer, unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer's address. The new servicer must notify you within 15 days after the transfer has occurred.

The Notices Must Include:

Name and address of the new servicer.

Date the current servicer will stop accepting your mortgage payments.

Date the new servicer will begin accepting your mortgage payments.

Toll-free or collect-call telephone numbers, for the current and new mortgage servicer, for information about the transfer.

Whether you can continue any optional insurance, such as credit life or disability insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change.

A statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.