Mortgage Servicing Transfer Notices Refresher Blog
Today’s blog provides a refresher on when a mortgage servicing transfer notice is required, what the timing requirements are, and the information that the notice must contain. To start, it’s important to note what is and what isn’t considered a transfer of service.
What Is (and Is Not) a Servicing Transfer Which Requires Notice under Section 1024.33
According to section 1024.33(b)(1) of Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), “each transferor servicer and transferee servicer of any mortgage loan shall provide to the borrower a notice of transfer for any assignment, sale, or transfer of the servicing of the mortgage loan.” While that appears quite broad, the regulation does provide guidance on which types of transfers are not considered assignments, sales, or transfers of servicing. Section 1024.33(b)(2) states, in part, the following:
“(2) Certain transfers excluded.
(i) The following transfers are not assignments, sales, or transfers of mortgage loan servicing for purposes of this section if there is no change in the payee, address to which payment must be delivered, account number, or amount of payment due :
(A) A transfer between affiliates;
(B) A transfer that results from mergers or acquisitions of servicers or subservicers;
(C) A transfer that occurs between master servicers without changing the subservicer;”
Please note, under section 1024.31 , “subservicer” is defined as “a servicer that does not own the right to perform servicing, but that performs servicing on behalf of the master servicer.” Additionally, the definition of “servicer” can be found in section 1024.2(b) .
As you can see from the above, not every change in servicer triggers the notice requirements. However, these exclusions apply only if there is no change in the payee, payment address, account number, or amount due. If any of those elements change, a servicing transfer notice is required even if the transfer is between affiliates, occurs as part of a merger, or occurs between master servicers without changing the subservicer.
Who Must Send the Notice and When
So, if a credit union determines that a servicing transfer does not meet one of the exclusions above and a notice is required, the next question becomes: who must send the notice, and when?
Well, as noted earlier, “each transferor servicer and transferee servicer of any mortgage loan” shall provide the notice of transfer. In plain terms, this means that both the original servicer and the new servicer must provide the borrower with a notice of the transfer. In other words, it’s time for the new servicer (the transferee) to say hello and for the original servicer (the transferor) to say goodbye to the borrower. An important difference to note is that the timing requirement will differ depending on whether you are the transferor servicer or the transferee servicer.
If a credit union is the transferor servicer, section 1024.33(b)(3)(i) requires that credit union to “provide the notice of transfer to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage loan.” However, on the flip side, if a credit union is the transferee servicer (the new servicer), then the regulation requires that the notice of transfer to the borrower be provided “not more than 15 days after the effective date of the transfer.” (Emphasis added).
You may be thinking, “is it really necessary for two notices to be provided?” The answer is no. Section 1024.33(b)(3)(i) goes on to state that a single notice may be provided by the transferor and transferee servicers, so long as the notice is “provided not less than 15 days before the effective date of the transfer of the servicing of the mortgage loan.”
It may also be helpful to point out that section 1024.33(b)(3)(ii) allows for extended time to send the notice under certain circumstances. Per the rule:
“(ii) Extended time. The notice of transfer shall be provided to the borrower by the transferor servicer or the transferee servicer not more than 30 days after the effective date of the transfer of the servicing of the mortgage loan in any case in which the transfer of servicing is preceded by :
(A) Termination of the contract for servicing the loan for cause;
(B) Commencement of proceedings for bankruptcy of the servicer;
(C) Commencement of proceedings by the FDIC for conservatorship or receivership of the servicer or an entity that owns or controls the servicer; or
(D) Commencement of proceedings by the NCUA for appointment of a conservator or liquidating agent of the servicer or an entity that owns or controls the servicer.” (Emphasis added).
Additionally, according to section 1024.33(b)(3)(iii) , the timing requirements are satisfied if the notices are provided at settlement by the transferor and transferee servicers (“whether as separate notices or as a combined notice”).
Required Content
Next, let’s do a quick refresher on the content of the notice. What information needs to be provided to the borrower? Per section 1024.33(b)(4) the notice shall provide the following information:
“(i) The effective date of the transfer of servicing;
(ii) The name, address, and a collect call or toll-free telephone number for an employee or department of the transferee servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;
(iii) The name, address, and a collect call or toll-free telephone number for an employee or department of the transferor servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;
(iv) The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days;
(v) Whether the transfer will affect the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain such coverage; and
(vi) A statement that the transfer of servicing does not affect any term or condition of the mortgage loan other than terms directly related to the servicing of the loan.”
Lastly, Appendix MS-2 contains a helpful model form for the disclosures required under the regulation that credit unions may want to review.
Questions? The Compliance Team is here to help. You can reach us at [email protected] .
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