Servicing rules after a move-up purchase: old-loan payoff, statements, early intervention

Reg X and Reg Z servicing rules give a conforming borrower a payoff statement within seven business days, error resolution in 30, live contact by day 36 of delinquency and no foreclosure filing before day 120 — investor rules add loss-mitigation menus.

Closing out the loan on the house you are leaving

Before the new conforming loan funds, the title company needs a payoff statement on the old one. Regulation Z requires the servicer to provide it within seven business days of a written request, and Regulation X requires prompt crediting of the payoff and release of the lien under state timelines. A stale payoff figure that leaves a small balance after closing is a common error on simultaneous transactions; if it happens, the 30-business-day error-resolution process (acknowledgment within five business days) is the tool, and the servicer may not report the loan delinquent while a timely notice of error is under review.

The first year on the new servicer

Your new loan must come with periodic statements each cycle showing the payment breakdown, fees and any escrow activity; payments must be credited the day received when complete, and partial payments held in suspense must be disclosed. Force-placed insurance — the abuse most relevant to owners who changed insurers at closing — requires two notices 45 and 15 days before the policy is charged, and the charge must be refunded if you prove continuous coverage. Keep your declarations page and send it to the servicer’s insurance address, not just the lender’s.

If two mortgages overlap longer than planned

Move-up buyers carrying both houses sometimes fall behind on one. The servicing rules draw a fixed timeline: live contact attempts by the 36th day of delinquency, written notice of loss-mitigation options by the 45th, assignment of personnel who can access your file, and no first notice or filing for foreclosure before the loan is more than 120 days delinquent. A complete loss-mitigation application must be acknowledged within five business days and evaluated for all available options within 30 days; if it arrives more than 37 days before a foreclosure sale, the sale cannot proceed while the evaluation is pending. For a conforming loan the menu is set by the investor — payment deferral, Flex Modification and forbearance under the Fannie Mae and Freddie Mac servicing guides — and the servicer must offer what the investor allows, not less.

Escrow, transfers and what the rules do not cover

Escrow analyses, transfer notices and the 60-day protection after a servicing transfer all apply here, as on any federally related mortgage loan. The rules do not govern the interest rate, the amount of a modification or whether a deferral is approved; those come from the investor’s guidelines, and a servicer’s “we don’t do that” should be checked against the published GSE servicing guide.

What to check

• Request the payoff statement on the departing home in writing; the servicer has seven business days to respond.
• Send proof of the new insurance policy to the servicer’s insurance address to avoid force-placed coverage charges.
• Use a written notice of error for mis-applied payments; acknowledgment in five business days, resolution in 30.
• Know the delinquency calendar: contact by day 36, written options by day 45, no foreclosure filing before day 120.
• Check any loss-mitigation refusal against the Fannie Mae or Freddie Mac servicing guide, which sets the menu.

Frequently asked questions

The old servicer says a few hundred dollars remain after my sale closed — what now?

Send a written notice of error citing the payoff statement and the settlement statement. The servicer must acknowledge within five business days and resolve the dispute within 30 business days, and may not furnish negative credit information about the disputed amount while the notice is pending. If the shortfall is real, it is usually interest accrued between the quote and the wire date.

We are behind on the house we could not sell — when can the servicer start foreclosure?

Not before the loan is more than 120 days delinquent, and not while a complete loss-mitigation application submitted more than 37 days before a sale is under review. Before that point the servicer must attempt live contact by day 36 and send written options by day 45. Because the loan is conforming, Fannie Mae or Freddie Mac rules define the deferral, modification and forbearance options available.

The rule in full: CFPB mortgage servicing rules. The borrower profile: Conventional loan borrowers. Related guides: Conventional loan requirements: credit, down payment, DTI, reserves, property · Conforming loan limits: how the FHFA number works and what happens above it · Can’t pay your mortgage this month? What to do in the next 72 hours · Missed a mortgage payment? What happens at 30, 60, 90 and 120 days.

Other federal rules for conventional loan borrowers

TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · HPA / PMI · FCRA · Flood insurance · MARS rule · SCRA · LO compensation

Servicing rules for other borrowers

First-time buyers · Veterans · Self-employed · Investors · Retirees · Bad credit · Foreign nationals · Physicians · Heroes · Rural buyers · Condo & second home · Refinancing