Selling a Loan
Question: Who should we name on the transfer of servicing notice if we are immediately selling the loan? Is this answer any different if we are merely table funding for the secondary party?
Answer: The transfer of servicing notice is designed to alert the consumer to the fact that a mortgage is a negotiable instrument that can be sold and that servicing is something that has value on its own and may also be sold or transferred. When you look at this primary purpose, the options on how to best notify the customer become clearer - or less muddy.
The consumer expects that the entity with which he or she is dealing is the entity to which they will be making payments. The transfer of servicing notice is a heads-up to let the consumer know that this may not be the case.
So, if you are funding and immediately selling the loan, the transfer of servicing notice should be provided in the name of the originating lender. Then at closing, give the borrower the transfer notice with the new servicer's information.
If the transaction is table-funded, the lender or broker taking the application should provide the early notice informing the customer that servicing may be transferred. This is true, even if the broker providing the notice will not be the lender. Then at closing, give the customer a notice with information about the actual lender and, if any, purchaser.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 6, 6/04
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