Loan onboarding challenges reveal servicing pain points

Camila Silva is highly organized and detail-oriented, especially when it comes to paying her bills on time — including the mortgage on her townhouse in the quiet outskirts of Washington D.C.

Car, utility and mortgage payments are all color-coded in the calendar on Silva's phone. Since the origination of her home loan in 2021, Silva said has actively worked to shave the balance down by setting up a bi-monthly payment plan. There have been no issues with the payments. 

That changed in the late fall of 2024, according to Silva.

She noticed a scheduled loan payment had not been withdrawn, and she couldn't make a payment through her lender's online platform. The issue, which she discovered later, was that her servicer, Freedom Mortgage, had sold her loan to Truist.

Silva said she received no notification from Freedom Mortgage about the loan transfer but did eventually receive one from Truist.

"We were with Freedom for over two years. They weren't our original servicer because, at that point, our loan had been transferred twice before, which had previously been a very smooth process," Silva said. "We had the paperless option and I expected an email in Freedom's message center to alert me, but there was nothing."

"It took us a bit to figure out what happened and where our loan went. It was a bit of a mess," she added. After calling Freedom Mortgage, Silva confirmed that Truist had taken over the loan. She later received a letter in the mail from Truist informing her that the loan was being onboarded into its system.

While chatter on a Reddit thread is by no means proof of broader issues, posts dated around the same time that Silva was experiencing trouble feature similar complaints from borrowers who specifically say they were affected by the Freedom-Truist loan sale.

"I was transferred from Freedom with very little transparency and the process to get an online account set up and pay my past-due balance was a giant headache," one Reddit user said. "It shouldn't be that hard."

Another user shared a similar experience: "I am having the same issue. Freedom Mortgage never contacted me. I noticed my scheduled payment didn't go through, so I logged into my FM account, and it said "service related" with no other info. I contacted them and they said they sold it to Truist."

The authors of those posts did not respond to multiple requests for comment. Freedom Mortgage and Truist also did not respond to multiple requests for comment.

Tension over miscommunication with borrowers during the transfer process and online complaints is common among mortgage servicers.

Around 11,400 of  roughly 28,000 CFPB complaints tracked last year involved mortgage payment difficulties, including those related to transfers, according to ICE Mortgage Technology, which has identified this as a client pain point.

Still, servicer communication with borrowers during loan transfers has improved over the past decade, especially since changes were made to federal mortgage rules, according to some consumer advocates.

Updates to the Real Estate Settlement Procedures Act under Regulation X, enforced by the Consumer Financial Protection Bureau, require servicers to notify borrowers at least 15 days before and within 15 days after a loan is transferred.

The so-called "hello-goodbye" letters, designed to ease transitions, were part of a broader set of rules aimed at helping clarify responsibilities between lenders and borrowers.

While core rules around servicing transfer disclosures appear simple, there are nuances to them, including certain exclusions and discretionary components. 

A former CFPB staffer said that cases like Silva's have become less common due to these rules — but added that weakened enforcement under the Trump administration could lead to a resurgence.

"If the bureau was still very active, this is the kind of thing you'd absolutely refer to us for enforcement — or at least check into," the former employee said. "The way things are currently going, there may be some regulatory oversight gaps."

Still, the source noted that "smart servicers" generally try to comply with the rules, in part because the law provides borrowers the right to sue if they experience harm from communication lapses. "If that borrower who didn't get a goodbye notice missed a payment, they could demonstrate harm and potentially join with other borrowers in a class action," they said.

Silva said the experience affected her customer satisfaction.

Andrea Bopp Stark, an attorney at the National Consumer Law Center, echoed concerns that looser CFPB oversight could lead to more errors.

"If nobody's watching, nobody is there to hold [servicers] accountable. That means it's going to be up to state attorneys general and consumer lawyers to hold their feet to the fire. The laws are still there," she said in an interview earlier this year.

States stepping up activity on borrower communication

Some state regulators are starting to play a more active role, although the pace is uneven. New legislation, lawsuits, and the hiring of former CFPB officials suggest increasing momentum in some areas.

Stark pointed to "zombie second mortgages" — a remnant of early 2000s lending practices — as another example of where servicer communication has broken down. These second mortgages, often part of 80/20 home loan arrangements, went dormant after the housing crash.

"Firms knew if they foreclosed, they weren't going to get paid because the first mortgage got all the money from the sale," Stark said. "Now, they're coming out of the woodwork … and they want their money."

She added: "Had these entities been communicating with borrowers, saying, 'So-and-so owns your loan, and this is how much you owe,' the borrower could have made arrangements and paid that."

In recent months, some borrowers have filed lawsuits accusing servicers of inflating the balances of long-dormant second mortgages and failing to send monthly statements. Shellpoint, the servicing arm of Newrez, has faced at least three complaints related to communication issues. Some states, like Connecticut and California, are introducing new laws in this area. Newrez has declined to comment on the case.

Servicers and their advocates have questioned whether consumer advocacy laws around zombie seconds like California's create unreasonable expectations for mortgage companies that can sever their right to collateral for technical violations and discourage them from extending credit secured by subordinate liens.

Sliding borrower satisfaction

The relationship between mortgage servicers and borrowers has historically been one fraught with potential issues, like the one Silva experienced. 

Borrower satisfaction with mortgage servicers remains low, according to a recent J.D. Power survey. Customer satisfaction with mortgage servicing fell to 596 on a 1,000-point scale — down 10 points from the previous year. Scores declined in all categories, including communication.

Only 31% of borrowers rated their servicer's messaging as excellent or perfect.

"There is a significant disconnect in the mortgage customer journey," Bruce Gehrke, senior director of lending intelligence at J.D. Power, said in a statement. "Satisfaction with mortgage origination is reaching record highs at the same time that satisfaction with mortgage servicing is reaching all-time lows. Servicers could be headed for some challenges down the road when volumes pick back up again."

Though Silva eventually learned her loan had been transferred to Truist and was able to make the missed payment, she reflected on the time when a previous loan of hers was serviced by Mr. Cooper.

While that company isn't immune to complaints about communication in transfers, settling at least one allegation in the past under its legacy Nationstar name, Silva's experience suggests servicers can take proactive steps to mitigate the concern.

"Communication was great during onboarding with my previous servicer, Mr. Cooper. I wish my new loan hadn't been transferred from the company," she added.