What Happens to Your Mortgage Mod When Loan Servicing Is Sold to Another Lender

In the mortgage industry, it is very common that a mortgage is sold to another institution. Your lender can also sell loan servicing part to another lender. This means that you will stop making payments to your old bank and start making payments under the same terms to the new bank. Banks usually notifies you the change one month in advance. Everything will be transferred to the new servicer. If you have a pending loan modification application, it will get transferred as well.

If you are behind the payments and already received the notice of default, the loan does not usually get bought by other lenders. No servicer would want to purchase loans that are not current. By the same token, loans in the process of modification are also unlikely to be bought because the borrowers are mostly having financial hardship. These borrowers may already be delinquent, or are becoming delinquent very soon. However, banks sometimes have disconnected systems so the loan is still possible to be transferred to another lender even if the loan modification is under way.

In the event that the loan is indeed purchased by another financial institution and servicing is transferred, don't believe your loan modification application will be transferred seamlessly. You should immediately call the new bank to verify all the documents have been transferred. Important documents such as financial worksheets and documents proving your hardship are what the bank looks into to evaluate your individual situation when processing your loan modification.

Since your new bank may have different requirements or process for mortgage modification, you will need to provide updated or even additional paperwork. More often than not, you almost have to start loan mod all over again. But if you are well organized on your previous paperwork, this process should be easy.


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