Such transfers normally take place without a hitch. But you need to make sure the rightful loan servicer receives your payments.

It’s the mortgage market’s equivalent of a Dear John letter: “Goodbye. We’ve sold your loan to another lender.”

Some borrowers receive the missive a few days after they close on their loans. Sometimes it arrives years later. But over the life of the mortgage, practically every homeowner is sure to receive one. The loan may be sold two, three or even four times to other lenders.

In mortgage-industry parlance, it’s called a “transfer of servicing.” But although some borrowers may take the notice as a personal affront, it’s really nothing to fret about.

“People shouldn’t take it personally,” said Alan Jones, senior vice president for servicing at Wells Fargo Home Mortgage in Des Moines. “It doesn’t have anything to do with anything they have done. It’s a standard business practice.”

Wells Fargo is one of the few lenders that rarely transfers the servicing rights to the loans it originates. Otherwise, the practice is very common.

About half of all loans are sold at the time of their origination, usually by lenders who simply are not equipped to collect payments, manage escrow accounts, pay taxes and insurance, respond to questions and prepare payoff statements when you sell or refinance. And most of the rest are sold later.

Why? Because administering loans has value. About one-quarter of 1% of the interest rate you pay goes to the firm that services your mortgage.

That doesn’t make it any more palatable for homeowners who now must mail their checks across the country instead of across town and speak with a faceless clerk in some other state, rather than the person down the street they’ve come to know and trust.

In reality, though, the change could be beneficial. Not only will you be dealing with a firm that can provide the service you deserve, but your new servicer also may be able to offer products and services not available from the original one.

Normally, handoffs from one lender to another take place without a hitch. Every so often, though, the seller or the buyer drops the ball. So you should take steps to make sure that yours isn’t fumbled.

Under the National Affordable Housing Act, you should receive a “goodbye” letter from your current servicer at least 15 days before your next payment is due. The letter must state the name, address and telephone number of the new servicer, the date the old company will stop collecting payments and the date the new company will start accepting them.

Under the Helping Families Save Their Homes Act, signed by President Obama on May 20, the new owner of your loan — which may or may not be the servicer — must also notify you of the transfer within 30 days.

You also should receive a “hello” letter from the new servicer that outlines the same information. But if you receive only a welcome letter, be wary; you may be the intended victim of a scam by someone who is hoping to persuade you to mail your payments to him.

If you just get the one letter from the new servicer, call the old one to verify that your loan has been transferred. If it hasn’t, notify the authorities.

Once you are certain an exchange has taken place, follow the instructions contained in the welcome letter. If you don’t, you run the risk of the payment not arriving on time.

If you send your payment to the former servicer, the company usually will forward it to the new one. But it won’t continue to do so for long. So if you keep making this mistake, your payments could become lost and you could incur late fees.

Often, the new servicer will send a new coupon book. But if your next payment is due before the coupons arrive, write your loan number on the check and send it so it arrives on time. It’s also a good idea to include the appropriate coupon from the old servicer. But either way, keep your own records.

If you make your payments through an electronic-funds transfer or automatic draft, you will need to cancel your old arrangement and start a new one. And because this often takes time, you may have to make your first payment to the new servicer by check.

Even if you follow the new servicer’s instructions, Jones of Wells Fargo says it’s always a good idea to monitor your account closely for a while “just in case there’s a disconnect.”

The new servicer cannot change the terms of your mortgage. Your loan number probably won’t be the same. (Keep track of your old loan number in case you have any questions.) But your rate, term, payment date and other conditions must remain the same.

However, at some point after the exchange, the new servicer will analyze your escrow account to determine whether an adequate amount is being collected each month along with your principal and interest payments to cover your property taxes, hazard insurance and mortgage insurance. If not, your total monthly payment could go up.

If you were specifically allowed to pay taxes and insurance on your own under the old mortgage, the new servicer cannot now demand that you establish an escrow account. But if the contract was neutral on the issue or merely limited the actions of your old service, the new one may be able to require such an account.

If you receive a notice during the transition period that either your insurance or taxes are due, call the new servicer to make sure that it has gotten the same notice. It is the old servicer’s responsibility to notify the tax collector and insurance company of the transfer. But if it messed up, you’ll get the bill.

How much your home is worth depends on who’s looking at it. Your home insurer will value your home in terms of the cost to rebuild it. A mortgage lender’s appraiser will value your property in terms of the sale prices of similar homes in your neighborhood that sold recently. The property tax assessor may have a different set of criteria.

Due to recent changes in the economy, the market value of your home could be considerably less than it was a few years ago. However, don’t be too quick to ask your insurance carrier to drop the valuation on your homeowner’s insurance. This would save you money but could leave you underinsured.

Replacement cost and market value aren’t necessarily the same. When home prices peaked in 2006, the market value of your home might have been much higher than the replacement cost value. Today, the sale price of your home could be a lot less than the cost to rebuild.

Talk to your insurance agent about how much coverage you need. This will depend on the square footage of your home, upgrades and amenities, and the price per square foot to rebuild in your area.

HOUSE HUNTING TIP: Most states levy property taxes, and the property tax structure and rate varies from state to state. In California, your initial property tax assessment is based on the purchase price. If you purchased your home in 2006, your property tax base could be higher than your home’s current market value. In this case, you can appeal to the assessor’s office for a reduction in your property taxes.

The current appraised value of your home, or one you want to buy, may be lower than you expected due to changes brought about by the Fannie Mae Home Valuation Code of Conduct that took effect May 1, 2009. One of the major changes is that loan originators — mortgage brokers and loan agents — can no longer talk directly to the appraiser.

This new restriction, while intended to be in the consumer’s best interest by keeping loan originators from pressuring appraisers, is resulting in misleading valuations — not in every case, but in enough cases to raise concern.

Many loan originators now order arm’s-length appraisals from third-party appraisal services. Some of the appraisers who work for these companies are hired to appraise properties outside their area of expertise. In one case, an out-of-area appraiser used a property in East Oakland, Calif., as a comparable for a home in Albany, Calif., a much pricier community located 15 miles away.

Appraisers used to appraising homes in planned-unit developments where there is uniformity in the housing stock often have a hard time making sense of market value in areas with a lot of diversity.

For example, some older neighborhoods were developed over several decades. Some homes have been remodeled and some not. House size can differ significantly. A 1,500-square-foot home could be next door to one with 2,400 or 3,000 square feet.

Another negative repercussion of the new code of conduct is that there are more inexperienced appraisers doing appraisals. Many of the experienced appraisers, who have plenty of work, won’t work for fees offered by the third-party appraisal companies, which may take a big chunk of the fee to run their companies.

Homebuyers or homeowners trying to refinance who receive a low appraisal should ask to see the comparable sales used by the appraiser. Even though your mortgage originator can’t talk to the appraiser, a homeowner or real estate agent can.

THE CLOSING: Ask your real estate agent to provide you with recent comparable sales that closed within the last three months. Then, ask the appraiser to consider these.

Financially challenged property owners have become a huge target for scam artists. Loan modifications can be especially risky. As a responsible Realtor, what can you do to protect your clients?

Julie Harris, who trains Realtors on how to assist homeowners with the loan modification process, was recently interviewed. At the National Association of Realtors’ midyear conference, the speakers on risk management insisted that Realtors who do loan modifications are illegally practicing law — it is a practice to be avoided. Instead, they said clients should be referred to the lender, to a reputable loan modification company, or to an attorney.

In contrast, Harris shared a number of ways that Realtors can legally assist their clients in navigating through the loan modification process and, in some cases, be paid for their efforts.

Whether you are compensated or not, helping someone keep their home is the right thing to do. It can also create tremendous viral marketing for your business. The typical adult in the U.S. knows about 250 people, on average. Given that each of those people also know hundreds of others, thousands of people could hear what you did to help a desperate family keep their home.

Before determining if working with loan modifications is right for your business, it’s important to understand some basic principles.

1. Loan modification myths
According to Harris, a common myth is that loan modifications are limited to FHA loans. This myth apparently began when the Obama administration issued guidelines for Freddie Mac- and Fannie Mae-owned or serviced loans. The truth of the matter is that you can modify any type of loan whether it’s a jumbo, fixed-rate, adjustable-rate, FHA, HELOC, etc. You can also modify just the first mortgage, just the second mortgage, or both. In many cases, the issue is the second mortgage, which is often at a higher rate. Harris reports that second mortgage holders are becoming more willing to do loan modifications, often because they will receive nothing if the first mortgage holder forecloses.

Another myth regarding loan modifications is that the seller must be delinquent. Harris says that to qualify for a loan modification, the seller needs to show “the desire to stay and the ability to pay.” Sellers must also demonstrate financial hardship. This can take the form of a hardship letter (some examples of hardship letters).

2. FDIC and FHA guidelines for loan modification
In addition to demonstrating hardship, the owner must also meet the lender’s qualifying ratios. To make this determination, lenders use a HTI ratio (housing expense to income). The HTI ratio calculation is straightforward: HTI equals net housing expenses divided by total gross monthly income. Total gross monthly income includes the person’s base salary and excludes overtime or bonuses.

The maximum housing expense to income (HTI) ratio varies based upon whether the loan is an FDIC- or FHA-insured loan. The current FDIC guidelines vary between 31-38 percent. FHA guidelines recommend 29 percent. If lowering the interest rate doesn’t produce the appropriate HTI ratio, then the next option is to extend the term of the loan, typically from 30 years to 35 or 40 years.

Sometimes the lender will consider a principal reduction. According to Harris, only 1.8 percent of all loans received a principal reduction during the first quarter to 2009. The lender is under no obligation to provide a principal reduction, only to “consider” this as an option.

To see how this process works, Quantrix.com has online software that illustrates the differences in the FDIC and the FHA models. By quantifying how much the lender will net by doing a loan modification vs. a foreclosure, the Quantrix tool allows lenders to determine which option provides them with the best return.

3. How lenders structure loan modifications
Harris explained that a typical scenario for a loan modification involves an owner who has a mortgage with a 7 percent or 8 percent interest rate. The owner is struggling to make payments and may have had several late payments. Provided that the lender agrees to the hardship and the loan modification request is packaged correctly, the lender may reduce the interest rate to 3 percent for the first three years.

In year four, the rate increases to 4 percent, in year five to 4.5 percent, and then becomes a fixed rate of 5 percent at the beginning of year six through the term of the loan. The lender waives all late fees and prepayment penalties. Arrears are added to the loan balance.

A slightly different scenario involves an owner with a high-interest-rate loan (12 percent or more). The lender agrees to reduce the interest rate to 3.5 percent for five years. The loan then adjusts to 5.5 percent for the remaining terms of the loan.

Helping consumers work through their problems can generate referrals. Is it also possible to earn money from doing loan modifications? See next week’s column to learn more.

Almost every state in the U.S. requires both sellers and their agents to make disclosures about the condition of the for-sale home. How you make these disclosures can move your transaction forward or land you in a lawsuit.

The company I worked for once did a study to determine the factors that were most likely to result in litigation. There were three primary predictors: real estate clients who are attorneys, new construction, and hillside properties. They also found that the closer the property was to the “City” (where there was a high concentration of attorneys), the more likely we were to be sued.

To avoid litigation when you sell your home, it’s important to make a full and accurate disclosure about the condition of your property. When Realtors represent a seller, they typically use mandated forms from either their state or local association of Realtors.

Even with the forms, it’s hard to know what to disclose. For example, do you have to disclose that the upstairs window is painted shut? What about that ceiling fan that works all right on the first two speeds but makes a terrible racket when you turn it on high? Is it necessary to disclose the 500 pounds of honey they pulled out of your attic last year because a huge colony of bees built a hive there?

Because there was such a high probability of being sued, our company policy was that if you have to ask, “Do I need to disclose that?” the answer was always “yes.”

An even greater challenge is selecting the correct language to use in making the disclosure. When speaking to a buyer or to your agent, you must be careful about what you say.

For example, a seller who had owned a property for a long period of time told the buyer that the property line was at the fence. The buyer purchased the property and was going to do a major remodel. When he had the property surveyed for the new building permit, it turned out that the fence was actually sitting on the neighbor’s property.

It was off by 1 foot. The property line was 220 feet long. That mistake, due to the pricey nature of the area, cost the seller more than $100,000. If the seller was unsure about the location of the property line, the seller should have responded, “I don’t know exactly. To determine the exact location, order a survey.”

I once had a listing where there were brown spots on the ceiling. Everyone assumed there was a roof leak. The roofers couldn’t find any evidence of a leak. What they did find was a huge beehive. Honey from the hive was leaking through the ceiling. If the cause was unknown, it would have been best to simply state, “brown spots noted on the master bedroom ceiling.”

The way to properly disclose any type of issue with your property is to avoid attempts to diagnose what you do not know. In other words, unless you are a construction expert (and even then if you are the seller), it’s best to note what you observe without guessing at the cause. Instead of saying that “the roof needs to be replaced,” a better response is to state, “Damaged and missing shingles noted on roof.”

We had several cases where our sellers were convinced that their house was haunted. Saying in writing that your house is haunted is probably not a great idea. Again, the best approach would be to avoid diagnosing. Instead, make objective observations. For example, note that “lights flicker at night”; “the upstairs hallway becomes unusually cold for short periods of time, even in the summertime”; or “rustling noises noted in the attic and in the garage.”

In these examples, the flickering lights could be due to an electrical problem; the unusual cold could result from a malfunctioning heating and air conditioning system; and the rustling noises could be rats or raccoons that have found their way into the home.

My experience has been that buyers will buy almost anything, provided that it’s disclosed upfront. In fact, when I sold my last two properties, we paid to have our own physical inspection prior to listing the property. We also completed the repairs before we put the property on the market.

Our agent had a copy of the inspection report available for any buyer who wanted to see it. We also had all the receipts demonstrating the repairs had been made by a licensed contractor.

The challenge with doing an inspection ahead of time is that it can uncover major problems. It may be that your roof does need to be replaced or that the foundation needs to be reinforced. By doing your inspection ahead of time, you won’t be ambushed by the discovery of a major problem while your property is under contract. You will need to disclose your report, however.

The situation is even more challenging when the buyer conducts an inspection and then cancels. In most states, you are probably obligated to disclose the report to future buyers. This is another reason it’s smart to do your own report and address the issues ahead of time.

Remember, when it comes time to make disclosures about your property, avoid diagnosing, tell the truth, and order a home warranty to give yourself an extra degree of protection after the property closes.

Not all seniors want or are able to remain in the same house, especially after the loss of a spouse. While some do choose to stay and “age in place” alone, others opt to head to a community near an adult child.

Many older folks want to remain independent and choose a small, single-family home while others choose to try out an apartment. They often have specific issues and needs — the same issues and needs baby boomers will face in a short few years.

After living so many years in the same place, these decisions are huge. Some don’t know where to start, and neither do their adult children.

In an effort to provide information to help transition parents, here are some seemingly “older” questions to consider that might be as far away as tomorrow. The first, of course, is: Can you find mom or dad a home that will replace the present home at the same price?

Housing
What types of housing is available in the areas you are considering? What are the costs for small, detached, single-family homes? What type of maintenance is required for quality rental homes? Do apartments and condominiums have suggested age restrictions? Does the condominium association permit subletting a bedroom? Are there special security provisions for owners who choose to live elsewhere part of the year?

Health Care
What level of emergency service is already in place? What is planned for the future? Are competent doctors, nurses and clinic specialists available and accessible? If not, how close are they in terms of miles and time? Where is the nearest “full-service” hospital, and what are its latest technologies and specializations? Is there a high-standard, long-term-care facility in the community? Are pharmacies and emergency clinics available at all times? Are local hospitals fully or underutilized? Would projected growth cause an overload that might jeopardize other citizens’ health services? Is special care for the handicapped available? Are visiting nurses or in-home services easy to arrange?

Climate
What is the truthful definition of local climate? What are the average temperatures in summer and winter? What are the wind conditions (how will it affect golf shots?) and how much rain falls in specific months? When does the snow arrive, how long does it stay and is it a limiting factor on the movement of persons and vehicles? What is the humidity? Is the area affected by dust, pollens or industrial discharges?

Public Safety
Is the community adequately policed? What is the response time for police or fire calls? Does it boast a low crime rate? Are there specific records of house break-ins, assaults, purse snatchings and car theft? Does the community have a 911 or similar response in place for police, fire or medical services now? What is the future probability of such a service online?

Government and Tax
What local taxes exist in addition to federal and state taxes? Are there any special tax exemptions for seniors? What are property tax valuations? Are city and county offices staffed by helpful people to provide quick answers? Are special taxes or levies likely? What has been the history of such taxes?

Recreation
What recreational opportunities exist for mature people? What sports — besides golf and tennis — are emphasized? What kinds of opportunities are available for fishing and hunting and what does licensing cost? Are there nice parks, walks and scenic views that are safe at all times of the day? Are there distinctive geological features in the area?

How many months a year is it possible to play golf? Are the green fees expensive or affordable? Is membership in a club available? Does the club restrict the number of rounds a guest can play? Does the club membership offer other benefits such as social events?

Are organized events such as ballroom or square dancing available? Do clubs, hobby groups and church organizations welcome newcomers and visitors?

Cultural Amenities
Is there a local symphony and nearby theatres with live stage productions? Is it easy for newcomers to participate in historical or art museums, bridge clubs, churches, lodges and special interest clubs? What is the predominant entertainment outside the home? What types of films do the movie theatres present? Is there a special time for seniors?

Transportation
Are there local bus, train, taxis and van services available? How long a drive, and how many miles, to a major airport? Are flights reasonably priced? What are the conditions of local roads and highways? Are there freeways, or limited access, linking the community to any major urban centers?

Moving is a big deal for an older consumer. Do your best to help your folks, family and friends with the research.

Recently my Buyers opened escrow on a brand-new home, and the builder refused to allow a home inspector on the property. He insisted that a home inspection is not necessary because the house has a one-year warranty and because an occupancy permit was issued by the building department. Since the home is new and it is warranted, it that enough or should they be concerned about having a home inspection?

Builders who are honest and reasonable know better than to prohibit a home inspection. A professional inspection is a routine process in most residential purchases, regardless of whether the home is old or new. When sellers prevent buyers from having a home inspection, their motives and integrity are suspect.

In your case, the builder has made two false assumptions: First, he assumes that new homes are free of defects because the building department has signed off on the construction; and second, he asserts that a one-year builder’s warranty insures a buyer against construction defects. Here are the problems with these assumptions:

1) All new homes have defects that are unknown to the builder, regardless of the skills and good intentions of the contractors and workers. It is simply not possible to build something as large and complex as a home without some human errors escaping the attention of the builder and the municipal inspector.

2) What good is a one-year builder’s warranty if defects are discovered more than one year after the house is purchased? Here is a potential situation: Five years from now, you decide to sell the home. The buyers hire a home inspector, and that inspector finds construction defects that were not discovered or disclosed when you purchased the property, because you didn’t hire a home inspector. The buyers demand that you pay for the corrective work, and you are stuck with the costs because the warranty has long since expired. Will your builder stand behind his work in that case? If so, let him put that in writing today.

3) Municipal building inspectors do not inspect with the same degree of scrutiny as an experienced home inspector. Their final inspections do not take three hours, and they do not consider the same numbers of issues. For example, municipal inspectors are concerned exclusively with code compliance, not with quality of workmanship. This can be crucial to a homebuyer because substandard work often does not violate the code. What’s more, even code violations can be overlooked by municipal inspectors.

For example, they do not test outlets for ground and polarity because their inspections take place before the electricity is turned on. City and county inspectors seldom walk on roofs and almost never crawl through attics or below floors. They typically do not operate built-in fixtures such as ovens, dishwashers or furnaces, and they seldom test drains for leaks. And unlike home inspectors, municipal inspectors have no liability for conditions that they overlook. Chapter one of the Building Code absolves them of all liability.

For the builder of this home to deny your right to a professional inspection is not just unreasonable, it is entirely unethical. If the builder won’t budge on this point, you should shop around for another home — one with a more fair-minded seller.