Mortgage Transfer Disclosure informs the borrower(s) that their mortgage loan has been acquired by a new lender and provides the new lender’s identity and contact information. This disclosure is required only for transfer of loans secured by the borrower's primary residence (owner occupied homes). The disclosure is generally prepared by the servicing department of the new lender and is prepared as part of their on-boarding of the loans to their system.
Regulation Z, which implements Truth in Lending Act ("TILA"), requires the lender to inform the borrowers of the identity of the new owners of their mortgage and provide contact information of the party that will handle certain issues such as exercise of recession rights, payment disputes, and loan modifications. The requirement for sending this disclosure was implemented on January 1, 2011. The lender complies with the section §1026.39 of Regulation Z by sending the Mortgage Transfer Disclosure.
As per §1026.39 of Regulation Z, the information that is required to be on the Mortgage Transfer Disclosure is:
If there are multiple lenders that are purchasing the mortgage loan, then the contact information for each of them needs to be included in the disclosure. However, if only one of them has been authorized to receive the consumer’s notice of the right to rescind and resolve issues concerning the borrower’s payments on the loan, then only the contact information of that lender may be provided.
Additionally, we recommended including the following information:
The new lender may also provide any additional information regarding the transfer of loan.
The change in ownership does not mean that loan servicer has changed. The company which handled the loan payments may be same and the borrowers may continue to send their mortgage payments to the same address. Irrespective of the change in the ownership of the loan, if the servicer changes, then the borrowers will receive a separate disclosure notice called the Servicing Transfer Disclosure Notice. Remember, Mortgage Transfer Disclosure is not the same as Servicing Transfer Disclosure Notice.
The new lender is required to mail or deliver the Mortgage Transfer Disclosure to the borrowers on or before the 30th calendar day following the date of transfer. The date of transfer can be, at the new lender’s option, either the date of acquisition recognized in the new lender’s books and records, or the date of transfer recognized in the books and records of the transferring party.
The Mortgage Transfer Disclosure is required to be provided clearly and conspicuously in writing and in a form that the borrowers may keep. The disclosure may be provided in electronic form, provided that the borrowers have provided their consent for receiving disclosures in electronic format. Also, the lender will have to comply with other requirements of the E-Sign Act.
In case of loans that have multiple borrowers, the lender needs to provide the disclosure to the primary borrower.
Regulation Z (12 CFR §1026.25 record retention) requires the lender to maintain evidence of compliance with Regulation Z for minimum two years after the date the disclosures is required to be made. Accordingly, the lender should maintain either a copy of the disclosure in the servicing/loan file or maintain another appropriate form of evidence of sending the disclosure in its records for a minimum of 2 years.
Updated: Aug 11, 2013