What Happens After Your Client’s Loan Closes?

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It is not uncommon for property owners to receive a notice that their mortgage servicing is being transferred to another company shortly after closing. A mortgage servicing transfer simply means a new company will collect the monthly mortgage payments. If your client’s loan includes an escrow account, also known as an impound account, for property taxes and homeowners insurance, the new servicer will also manage those disbursements.

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These servicing transfers are often smooth, but there are important steps your client can take, and that you as their broker can guide them through, to help ease the transition. The last thing any lender or broker wants is for a borrower’s payment to be misplaced during a system change.

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If your client is set up on autopay for their mortgage payment, whether the loan was funded through Orion or another lender, brokers should advise them to cancel payments with the outgoing servicer immediately. It is also important for borrowers to save their most recent mortgage statement. This statement provides verification of the outstanding principal balance and the balance in the escrow account for taxes and insurance. It will also reflect the total mortgage interest paid to that servicer, which can be matched with IRS Form 1098 for tax filing purposes.

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Helping Clients Navigate a Mortgage Servicing Transfer

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After your client makes their initial payment to the new mortgage servicer, they should verify the payment has cleared their bank account and contact the new servicer to confirm it has been properly applied. If the loan includes an escrow account, they should confirm the escrow balance before and after the payment to ensure everything has transferred correctly. Many brokers recommend that borrowers wait until one or even two payments have been successfully processed and reflected on a statement before enrolling in autopay with the new servicer.

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Brokers should also remind clients with escrow accounts to follow up when property tax and insurance payments are due to verify they were paid on time and in full. Property tax information is available through the county website where the property is located. Borrowers should also notify their insurance company of the new servicer and request confirmation once payments have been issued. If questions arise at any stage of the mortgage servicing transfer process, clients should be encouraged to contact their broker directly.

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Why Mortgage Loans Are Sold and Why Terms Do Not Change

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Although it sounds simple, servicing transfers can create confusion. A client who just purchased or refinanced a home may receive a letter informing them that their mortgage has been sold and will now be serviced by a new institution. Naturally, they may ask whether this is allowed, whether their loan terms have changed, or why their lender would sell the mortgage.

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Among the many documents signed at application was a Mortgage Servicing Disclosure. This disclosure explains what percentage of a lender’s loans may be sold after funding. In today’s mortgage industry, it is common for a large percentage of loans to be transferred to another servicer. Importantly, when a mortgage is sold or servicing is transferred, the interest rate, loan terms, and monthly payment do not change. Those terms are locked in and protected under the original loan agreement.

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This is another reason why working with a mortgage broker provides added value. Brokers can educate borrowers on the mortgage servicing transfer process, set expectations after closing, and provide personalized guidance when questions arise. That level of support strengthens long-term client relationships and reinforces your role as a trusted advisor long after the loan funds.

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