Notice of Transfer of Servicing Rights informs the borrowers that the servicer on their mortgage loan has changed and they need to send their payments to a new servicer from the date that is mentioned in the notice. Notice of Transfer is provided by a servicer upon any assignment, sale, or transfer of the servicing of a first lien loan. The purpose of the notice is to provide the borrowers enough time to start sending mortgage payments to the new servicer.
Notice of Transfer of Servicing Rights is usually referred to as Notice of Transfer or Goodbye Letter.
The borrower should receive the notice from the present servicer at least 15 days before the date of transfer of servicing. The new servicer may send an additional notice which would be received by the borrower not later than 15 days from the date of transfer.
As per Regulation X, the requirement for sending a Notice of Transfer only applies to first lien loans. A servicer is not required to send the Notice of Transfer for open-ended lines of credit (such as HELOCs) or second lien loans.
Regulation X prescribes the requirements for Notice of Transfer under § 1024.33 (12 CFR 1024.33). Regulation X implements Real Estate Settlement Procedures Act (RESPA) and is enforced by Consumer Finance Protection Bureau (CFPB).
The model template included in Appendix MS-2 of Regulation X provides sample language that must be included in the Notice of Transfer. Minor modifications to the sample language may be made to meet the particular circumstances of the servicer, but the substance of the sample language should not be omitted or substantially altered.
The Notice of Transfer should contain the following:
You should receive a Notice of Transfer at least 15 days from the effective date of transfer of servicing. You will have to amend the payee name, address, and account numbers for any ACH, Bill Pay, or other automatic payments. You have up to 60 day grace period starting from the date of transfer of servicing to send the payments to the present (transferor) servicer. During this time you will not be assessed any late fee or your payment will not be reported late if you send the payment before the payment due date to the present servicer instead of the new (transferee) servicer. However, it is best to start sending payments to the new servicer as soon as possible.
After you have received the Notice of Transfer, monitor at least two payments to ensure they are being correctly applied to your loan. In addition to monitoring your mortgage account, you should also monitor your credit report to ensure that it accurately reflects payments made toward the loan.
If you notice any discrepancies on your mortgage account or credit report then contact your new servicer right away. We recommend sending a Qualified Written Request (QWR) to initiate your inquiry or dispute.
The transfer of servicing does not affect any of the loan terms and you are obligated to make payments and meet other requirements of the loan.
The transferor servicer must deliver the Notice of Transfer at least 15 days before the effective date of the transfer of the servicing. The transferee servicer must deliver the Notice of Transfer not more than 15 days after the effective date of the transfer of the servicing. Delivery means placing the notice in the mail, first class postage prepaid.
The transferor and transferee servicer may send a combined Notice of Transfer. The combined notice must be delivered at least 15 days before the effective date of the transfer of the servicing.
The servicer may send a Notice of Transfer not more than 30 days after the effective date of transfer in any of the following cases:
The timing requirements of Regulation X are satisfied if the Notices of Transfer is delivered at settlement (loan closing) by the transferor servicer and transferee servicer, whether as separate notices or as a combined notice.
You are not required to provide to the borrower a Notice of Transfer of Servicing for the following transfers if certain conditions are met:
In the above transfers, the exception will apply only if there is no change in the following:
Additionally, The Federal Housing Administration (FHA) is not required to provide to the borrower a Notice of Transfer of Servicing in cases where a mortgage insured under the National Housing Act is assigned to FHA.
You are not required to send Notice of Transfer for mortgage loans that are not regulated by Regulation X. Refer to Regulation X rules for further details to determine whether the loan is exempt.
Recordkeeping is not specifically prescribed for Notice of Transfer. However, Regulation X requires recordkeeping of 5 years for certain provisions. We recommend maintaining evidence of delivering the Notice of Transfers for a period of 5 years.
Updated: Nov 05, 2013