One of the most frustrating things that can happen to you while you’re working on a loan modification with your lender is a service release or service transfer.
A service release is when the lender who is handling your mortgage transfers (or sells) your mortgage to another lender.
If you’re missing mortgage payments, facing financial pressure and trying to resolve the issue with your bank – a sudden service release can feel like a complete blow to any progress you’ve made.
Service releases can be very stressful
Unfortunately, there is no way to prevent a service release or to request that your loan not be released. You can’t control when a service release happens and you can’t opt out of one.
Once your lender decides to service release your mortgage, they are required to give you a 30-day notice that the release is going to happen. However, they may only mail you one written notice, and it might not arrive in a timely manner.
After they release your mortgage, there will be a 15-30 day period where it feels like your loan is “in limbo.” This can be very stressful.
During this period when your loan is in limbo, the old lender will not speak with you about your mortgage anymore. The most they will do is tell you that you have a new lender and you need to call them.
Unfortunately, a service release can stop an existing loan modification review, create delays and force you to start over. Even if you speak to your old bank (the one selling the loan) to express concerns about how the release will affect your modification, it won’t help. Often, they will tell you not to worry and they will assure you that all the information you’ve submitted will transfer.
This is not true so don’t trust what they tell you!
4 things you can do to get your loan modification back on track
- Be proactive. Don’t wait for the new lender to reach out to you! As soon as you find out that your loan is going to be service released, start tracking your loan with your new bank.
- Start calling the new lender every 48 hours and ask the the same question each time:
- “Has my loan boarded yet?”
- You cannot get going on your loan modification again until your loan has populated in the new lender’s system so it’s your job to call regularly so you can catch the exact moment when your loan has boarded so you know the exact moment when you should submit your documents again.
- If you wait for the new lender to contact you, you will be waiting several more weeks.
- Don’t be fooled by your old lender’s lies! Assume that no information from the old lender will transfer and be prepared with a brand new loan modification package.
- If you were in the middle of a loan modification review with your old lender, don’t believe them when they tell you that everything will fully transfer over. You cannot expect to just pick up where you left off.
- You should treat the service release as if you’ve been pushed back to the beginning of the process. Gather your financial documents again and UPDATE EVERYTHING so all your pay stubs and bank statements are recent, within the last 30-60 days.
- Get the updated application from the new lender as soon as you know about your service release. Each lender has a different application form that accompanies your modification request. Even if your loan hasn’t boarded in the new lender’s system yet, you can still request that your new lender send you a blank copy of THEIR loan modification application so you can work on it and get it ready as soon as possible
- Don’t be afraid to submit your loan modification package even if you don’t have your loan number yet! You may not have your loan number right when you’re ready to submit your modification package. If your loan modification package is updated and ready to be submitted, don’t let your lack of loan number stop your submission.
- Instead of including the loan number on the application, write your social security number on the loan number line instead.
- When you finally get your loan number, you can update your documents and re-submit them with your loan number but the benefit will be that your review will already be opened.
3 quick things to know about service releases
- Your investor doesn’t change: While the company servicing the loan is changing, the investor who owns your loan (typically Fannie Mae, Freddie Mac, FHA etc.) does not.
- Sometimes, service releases can be a good thing for your loan modification: If you’re having problems with your existing lender and how they’re handling your modification, sometimes the fresh start can help.
- The most common lenders to take your loan after a service release are: Rushmore Loan Management, PennyMac, Specialized Loan Servicing, Select Portfolio Servicing, Shellpoint Mortgage Services, PHH Mortgage, Caliber Home Loans
If you are having issues with a service release or have questions about how a service release will affect your loan modification, feel free to give me a call at (425) 654-1674.