Here's What Happens When Another Loan Servicer Takes Over Your Mortgage

Many people use the terms "mortgage lender" and "mortgage loan service" interchangeably, but they're actually different. Your mortgage lender is the financial institution that loaned you money to finance a home purchase. Your mortgage loan servicer, on the other hand, is the company that oversees your mortgage once it's in place and manages your ongoing payments and transactions.

When you get a mortgage statement every month showing how much money you owe, that statement is generally coming from your mortgage loan servicer. Similarly, if you have questions about your mortgage payments once your loan is in place, it's your loan servicer you'll reach out to for more information.

The loan servicer you start out with, however, could change over time. This is actually a pretty common thing. But it's important to know what to do when another loan servicer takes over your mortgage.

Pay attention to details

When a new loan servicer takes over your mortgage, your debt does not go away. All it means is that you'll have to start sending your payments somewhere else, and if questions arise about your mortgage, you'll need to direct them to your new loan servicer once it takes over.

Now, one thing that your current and new loan servicer must do is inform you of this change. If it doesn't, you won't know where to send your payments. The Consumer Financial Protection Bureau says that your old loan servicer generally needs to give you at least 15 days notice before your loan is transferred over to a new loan servicer. And often, you'll get more of a heads-up than that.

Your new loan servicer, meanwhile, should generally send you a notice within 15 days after getting the rights to your loan telling you where to send your payments going forward. You may not get a separate notice, however, if your initial notice from your old loan servicer contained that information.

Why should you care about your loan servicer?

It may not make much of a difference who your loan servicer is in theory. But it is important to make sure you're sending your mortgage payments to the right place. If you continue to send your mortgage payments to your old loan servicer, your account may not get credited accordingly.

That could lead to issues where you're flagged as being delinquent on your mortgage payments when you actually sent them in on time, albeit to the wrong place. And the last thing you want is to cause damage to your credit score when you actually have the money on hand to make your payments.

Also, many people have their mortgage payments set up to pay automatically out of their checking accounts every month. You'll need to pay attention to when your new loan servicer takes over and change your automatic payments so they go to the right place. But other than that, there's really not much you need to do when your mortgage is taken over by a new loan servicer.