What is Notice of Transfer of Servicing Rights?

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.

Notice of Transfer Required Only for First Lien Loans

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.

Notice of Transfer is required as per Regulation X

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).

Contents of Notice of Transfer of Servicing

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:

1. Effective date of the transfer of servicing.
2. The name, consumer inquiry addresses (including, at the option of the servicer, a separate address where qualified written requests must be sent), and a toll-free or collect-call telephone number for an employee or department of the transferee servicer.
3. A toll-free or collect-call telephone number for an employee or department of the transferor servicer that can be contacted by the borrower for answers to servicing transfer inquiries.
4. The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days.
5. Information concerning any effect the transfer may have on the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain coverage.
6. A statement that the transfer of servicing does not affect any other term or condition of the mortgage documents, other than terms directly related to the servicing of the loan.
7. A statement of the borrower's rights in connection with complaint resolution as illustrated in Appendix MS-2 of Regulation X.

Borrower’s Considerations

Modify Payment Setup – You have maximum 60 days

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.

Monitor Payments and Check Credit Report – File QWR, if needed

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.

No Change in Your Obligations

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.

Servicer’s Considerations

Timing of Notice of Transfer of Servicing

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:

1. Termination of the contract for servicing the loan for cause
2. Commencement of proceedings for bankruptcy of the servicer
3. Commencement of proceedings by the Federal Deposit Insurance Corporation (FDIC) for conservatorship or receivership of the servicer or an entity that owns or controls the servicer

At Settlement

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.

Exemptions for Sending for Notice of Transfer of Servicing

You are not required to provide to the borrower a Notice of Transfer of Servicing for the following transfers if certain conditions are met:

1. Transfers between affiliates
2. Transfers resulting from mergers or acquisitions of servicers or subservicers
3. Transfers between master servicers, where the subservicer remains the same. Master servicer is the entity that has the right to perform servicing. A master servicer may not actually perform the servicing and, instead, delegate it to a subservicer who performs the servicing on its behalf.
4. Federal Housing Administration (FHA) is not required to the notice if the mortgage loan that is insured under the National Housing Act is assigned to the FHA.

In the above transfers, the exception will apply only if there is no change in the following:

1. Payee
2. Address to which payment must be delivered
3. Account number
4. Amount of payment due

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.

Loans Exempt from Regulation X

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

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.

Document Summary

Sample Documents

1. Sample Notice of Transfer of Servicing Rights

External Links

1. Bank of America, Notice of Transfer
2. Regulation X, §1024.33 Mortgage Servicing Transfers

Updated: Nov 05, 2013