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Bye-Bye Loan, the World of Home Loan Transfers

You may spend weeks finding that perfect lender when you buy your home, but that doesn't mean the company will stick around for long. In today's mortgage industry, the practice of transferring loans is commonplace. Some don't even wait long enough for the first payment to be sent.

This practice is so common, in fact, that you should prepare yourself for the eventual transfer of your loan. There are some things you need to know to protect yourself, and your credit history (yes, some loan transfers can wreak havoc on your credit report). Here are some helpful hints for you and rules that lending companies are required to follow:

1. You must be able to determine if a transfer of your mortgage is legitimate. This means getting verifiable letters from your original loan company and the new one. If you only receive a letter from the new lending institution, call or write your original lender and verify that the transfer actually happened (or is impending). Without verification from your lender, you may be falling into a scam.

2. It is also a good idea to call your local Better Business Bureau to check on the new company, especially if it is not a recognizable company. Be careful. Some company names are deceptively close to legitimate companies to fool you!

3. You should receive at least 15 days notice prior to the payment due date. If you do not receive this notice, be sure you are not subject to any late fees. In fact, most companies will offer a 60-day grace period during which no late fees are assessed. This covers you in the event you send your payment to the wrong company.

4. Before a transfer occurs, you should be given the following bits of information: the name and address of the new company; a telephone number where a customer service representative is available; the date the current company will stop accepting payments on your loan; and the date the new company will expect them. This information should come from your existing lender, then repeated by the new one in a "welcome" letter.

5. Just because your loan is being transferred doesn't mean your terms should change. The only fees that could be altered are those related to servicing the loan. However, if your original loan did not clearly state the right to pay insurance on your own, you may find yourself having to pay up front into an escrow account for these types of services. Be sure to clear up details like this before you sign the original loan with the thought that this loan will be transferred in the future.

6. Always contact your lender in writing if you have problems (and keep a copy of your correspondence). If they do not respond appropriately to your concerns, turn to outside help, such as the Better Business Bureau, the Department of Housing and Urban Development (HUD), or your local or state consumer affairs division.

Source: Based on information gathered from the Better Business Bureau.

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