Goodbye Letter

Goodbye letter is the formal written notice that the outgoing loan servicer sends to the borrower when servicing of their mortgage is being transferred to a new company. Required under federal law, the goodbye letter is the borrower's first notification that a change is coming — it tells them who will be handling their loan going forward, when the change takes effect, and what to do with their next payment. For note investors, sending a proper goodbye letter is not optional; it is a compliance obligation that must be completed every time a loan changes servicers.

RESPA Requirements

The goodbye letter is governed by Section 6 of the Real Estate Settlement Procedures Act (RESPA) and its implementing regulation, Regulation X (12 CFR 1024.33). The key requirements are:

• Timing — The outgoing servicer must send the notice at least 15 days before the effective date of the transfer. The notice may be sent up to 30 days before the transfer date.
• Combined notice option — RESPA allows the outgoing and incoming servicers to send a single combined notice rather than separate goodbye and hello letters, as long as it meets the content requirements for both and is sent within the required timeframes.
• Required content — The notice must include the effective date of the transfer, the name, address, and toll-free phone number of the new servicer, information about how the transfer affects the borrower's payment obligations, and a statement that the transfer does not affect the terms of the loan.

During the 60-day window following a servicing transfer, RESPA provides a safe harbor: the borrower cannot be charged a late fee if they mistakenly send their payment to the old servicer. This protection exists precisely because servicing transfers create confusion, and the goodbye letter is the primary tool for preventing it.

What a Goodbye Letter Should Include

A well-drafted goodbye letter covers the following items:

Most loan servicing companies have standardized goodbye letter templates that meet RESPA requirements. As a note investor, you generally do not draft this letter yourself — your outgoing servicer handles it as part of the transfer process. However, you should confirm it was sent and review it for accuracy.

Why It Matters to Note Investors

In the secondary note market, servicing transfers happen frequently. Every time you buy a loan, sell a loan, or switch servicers, the goodbye/hello letter pair must go out. Here is why it deserves your attention:

• Borrower confusion leads to missed payments. If the borrower does not know where to send their payment, they may stop paying altogether — especially on non-performing loans where the borrower may already be disengaged.
• Regulatory exposure is real. Failure to send a RESPA-compliant transfer notice can result in borrower complaints, regulatory scrutiny, and potential liability. The Consumer Financial Protection Bureau (CFPB) actively enforces servicing transfer rules.
• It signals professionalism. For borrowers on distressed loans, a clean servicing transfer with proper notices can set a positive tone for future loss mitigation discussions. The goodbye letter from the prior servicer, paired with the hello letter from your servicer, shows the borrower that their loan is being handled by legitimate, compliant parties.

Coordinating with the Hello Letter

The goodbye letter and hello letter are two halves of the same compliance process. The outgoing servicer sends the goodbye letter before the transfer date; the incoming servicer sends the hello letter no later than 15 days after the transfer date. During loan boarding, confirm with both servicers that their respective letters have been sent on schedule. A gap between the two notices — or missing notices entirely — creates unnecessary risk and borrower confusion that can complicate your investment.