If we receive a notice of error (alleging an NOE during the time we serviced the loan) for a loan that has already been transferred (still within the 1 year timeframe), are we required to send any notice to the new servicer?
We have dissected Regulation X’s mortgage servicing rules and do not find any definitive requirement for you to send notice to the new servicer. [As you noted, clearly, the Notice of Error is timely as to you because it comes within one year after servicing for the mortgage loan that is the subject of the asserted error was transferred from you to a transferee servicer.]
Despite the lack of a clear directive in the regulation for you to furnish notice to the new servicer, we believe such a notice should be sent for two reasons. The first is that there is likely to be a contractual obligation for you to provide the notice to the other servicer. Second, the spirit and intent of the mortgage servicing rules contemplate a reduction in hassle for the borrower during the term of the loan. That hassle reduction is facilitated by having the records relating to the loan consolidated to the extent possible so that what occurred in connection with the loan over its life is readily discernible without having to go to multiple parties who played a role at some point during the life of the loan.
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