Service Releases During A Short Sale

During a short sale or any workout option with a mortgage servicer you may hear the term “service release”. In simple terms a service release is when your loan is switching to a new servicer. For example; your loan is with BOA and now it is going to Ocwen Mortgage Servicing. A service release can occur anytime and the homeowners should receive a “Good-Bye” letter in the mail informing them of the pending service release. A service release can at times act in your favor, but the majority of the time, it means a delay in the processing of the workout option or a complete restart of the process.

It’s important to understand that many times the bank your payment is made to is not actually the owner of the loan. 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 on various variables so when your loan is being sold it is probably going along with hundreds of others.

When processing a short sale and a service release goes through, the work out option review will likely start all over with the new servicer. But for example if a short sale approval is on file, you may be able to request that the servicing rights are retained in order to allow the transaction to close. A request such as this is never guaranteed to be approved, but with the right contacts and communication your chances of having the servicing rights retained are increased. If an approval is not on file for a work out option, the chances of having servicing rights retained are slim to none. If you know a service release is around the corner and you are close to approval make sure you push the file forward as quickly as possible.

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