What to do if your Mortgage Lender/Servicer Closes
In the wake of the closure of Taylor, Bean and Whitaker – the 12th largest mortgage lender in the US – two weeks ago, many borrowers are still scratching their heads over what to do. Should they continue to make mortgage payments as scheduled? To whom should they mail them to? What about those who were pre-approved for mortgages and/or in the process of closing on a mortgage? “I’m at the point where, do I still have a mortgage? Or who do I pay my mortgage to? Everything’s in limbo right now,” said one concerned borrower,” summarized one uncertain borrower.
The company itself has not been able to provide any clarity on the issue, since it has already ceased day-to-day operations, although Bank of America has stepped in and taken control over TBW’s servicing operations. From the standpoint of borrowers them, it looks like the transition will be relatively painless, involving little more than writing a check to a different entity at a different address. Ginnie Mae has issued a directive fully outlining this process.
Unfortunately, it looks like potential borrowers that were promised mortgages will have to restart the process with BOA or another lender. However, “If you had an appraisal completed as part of an uncompleted loan application, your loan file (including the appraisal) could be transferred to another lender. FHA appraisals are valid for six months.”
Apparently, most instances of lender closure/bankruptcy are resolved just as easily. Typically, the mortgage servicer “will sell its assets under the supervision of the bankruptcy court to another financial institution and transfer the servicing of your loan to another company.” According to the Federal Trade Commission, you must be notified at least 15 days before the effective date of the transfer by both the old and new servicers. “In addition, you have a 60-day grace period after a transfer to a new servicer. That means you can’t be charged a late fee if you send your mortgage payment to the old servicer by mistake and your new servicer can’t report that payment as late to a credit bureau.”
With regard to escrow accounts, the old servicer must continue to make payments (taxes, insurance, etc.) as usual. “Even if your servicer files for bankruptcy or goes out of business, it is responsible for making the escrow payments in a timely way.” As with the case of Taylor, Bean and Whitaker, mortgagers that have not yet closed will probably be canceled, although it’s important to speak to the lender anyway to confirm the status.