After your mortgage closing you will begin to receive statements that must be paid to maintain a standing, on your loan. The entity responsible for sending these statements and addressing any inquiries is referred to as the loan servicer.
It’s important to note that the loan servicer may not necessarily be the entity that initially provided your loan as lenders have the option to transfer the servicing rights to institutions after originating the loan.
This transfer of servicing rights can occur after your loan closing or at any point during the term of your loan. Below are some points to understand about loan servicing.
When Is Your Initial Payment Due?
Unlike rent payments mortgage payments work differently in terms of dates. When you pay January rent on January 1st you’re essentially paying for occupancy until January 31st. However if you make your January mortgage payment on January 1st you are covering the interest accrued from December 1st to December 31st.
For example if you closed on a mortgage on December 15th you would need to pre pay interest for the period, between December 15th and December 31st.
In terms you’ll need to pay your January mortgage upfront meaning your initial mortgage payment won’t be due, until February 1.
This rule applies for any month no matter when you close during the year.
When will you find out if your loan servicing will change hands?
Starting from October 3 2015 all lenders are mandated to use the mortgage disclosures.
The first disclosure you’ll receive within three days of applying is a three page form called the Loan Estimate. At the bottom of page three there’s a section labeled ‘Servicing’, with two options;
- We plan to service your loan. If so you’ll make payments to us.
- We plan to transfer servicing of your loan.
Your lender must indicate which option applies on the Loan Estimate within three days of receiving your application. This way you’ll know promptly whether they intend to keep or transfer the servicing of your loan.
If they choose to transfer servicing a document signed along with closing papers will specify which new lender will be handling your loan servicing.
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