Chapter 13 bankruptcy is often an appealing option for debtors who need relief but want to keep their homes. However, sometimes debtors get concerned when they learn of mortgage servicer transfers during Chapter 13 bankruptcy in New Jersey.
These transfers happen often and usually there is no need for concern. However, there will be changes in how you pay your mortgage. The Chapter 13 bankruptcy attorneys at Gillman Capone can confirm a mortgage servicer transfer and advise you about record-keeping to ensure the change does not have an impact on your bankruptcy.
Mortgage servicing is the process of accepting mortgage payments and applying them to accounts, assessing late fees, and calculating interest rates on variable rate loans. The mortgage servicer may also oversee paying property taxes and insurance payments from the homeowner’s escrow account. If you default on your loan or want to modify your mortgage, the mortgage servicer handles these matters.
Most people obtain mortgages from banks, credit unions, or mortgage companies. These institutions may also provide mortgage servicing, but the right to service mortgages is often sold to other investors. If your lender sells the mortgage servicing rights to another investor, you still owe the money to your lender, but you will make payments to the company handling the mortgage servicing responsibilities.
If you are in Chapter 13 bankruptcy when a mortgage service transfer occurs, the impact on you depends on whether you make your mortgage payments directly or through the bankruptcy trustee as part of your plan of reorganization. If you learn that there will be a change in your mortgage servicer, is is important to speak with a New Jersey attorney who can explain how the change might affect you.
The terms of your mortgage agreement do not change when the mortgage servicer changes. Your balance, interest rate, and monthly payment should not change.
According to 12 Code of Federal Regulations § 1024.33, you are entitled to timely notice of the transfer. Your original mortgage holder must notify you at least 15 days prior to the transfer, and the purchasing company must also notify you. You should send a copy of the mortgage servicer transfer notification to your New Jersey attorney, who can verify that the new mortgage servicer has filed the necessary paperwork with the court.
When your mortgage servicer changes, theoretically it should have no impact on your mortgage payments. Unfortunately, there are often technological glitches and errors that can create challenging situations if not corrected quickly.
Sometimes, payments that are made on time are misapplied, which can lead to unwarranted late charges. A report of a late payment may have an impact on your Chapter 13 bankruptcy, so it is critical to inform your attorney immediately if you believe a mortgage payment was misapplied after a servicer transfer.
Lost correspondence or documentation is frequently a problem, and the new mortgage servicer may understate your escrow, which could lead to higher payments that might be difficult to manage if you are following a Chapter 13 plan of reorganization.
If you were accustomed to paying your mortgage through automated withdrawals from your bank account, that habit had to change when you entered bankruptcy. It will need to change again if a new company takes over servicing your mortgage.
If you are in Chapter 13 bankruptcy and still paying your mortgage directly, the new mortgage servicer should have contacted you with new payment instructions. If you are paying through the bankruptcy trustee, our attorneys can ensure they have notice of the change in mortgage servicer and the new payment instructions.
When you are in Chapter 13 bankruptcy, it is essential to keep meticulous records. Mistakes happen, and you do not want to be held responsible for others’ errors.
Using a paper check is the best way to keep track of your mortgage payments, even if you have not used checks for years. Write your loan number and bankruptcy case number on the memo portion of each check, which helps ensure the payment will be credited correctly. Keep copies of the canceled check and bank statements for that account together.
These paper documents are proof of payment if there is any dispute at any time during the bankruptcy proceedings. When you emerge from a Chapter 13 bankruptcy after completing your repayment plan, our New Jersey attorneys can use your paper records to confirm that the bankruptcy discharge order and your current mortgage statement are correct.
Lenders often sell the right to service mortgage loans they originate. The process usually runs smoothly, but problems can arise with mortgage servicer transfers during Chapter 13 bankruptcy in New Jersey. When you work with the bankruptcy lawyers at Gillman Capone, we can protect your interests and handle any administrative issue that comes up. Reach out to us if you are having a problem with your mortgage servicer.
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