WHAT DOES IT MEAN TO BE SERVICE RELEASED? WHAT IS LOAN SERVICING?

In many cases the lender your payment is made to is not actually the beneficiary of the loan. This means that when the loan was created it was not their that was used; even if they originated it. The lender you make your payments to is typically the loan servicer and they make money by earning a portion of the interest that you pay. These “Servicing Rights” are sold in pools depending various variables so when your loan is being sold it is probably going along with hundreds of others.

When your loan is “service released” it is being transferred to another loan servicer. For example if your loan is currently with Bank Of America it could be “service released” to Chase who will from that point on be the new servicer handling your loan.

A service release during a short sale could cause major implications. If the transaction does not have short sale approval it will likely start all over. If you have short sale approval it is possible to potentially have the new servicer uphold the approval, but this is never guaranteed. It’s important for borrowers to keep an eye out for any mail that states that their loan will be service released. Having the knowledge of a pending service release is important because at times it’s possible to request a postponement of a service release to allow a transaction to close.

If you have any questions regarding a service release or how it may affect your transaction please feel free to reach out to us as we seek solutions to these matters daily.

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