Resale mortgages
What Happens When Your Mortgage Gets Sold?
Mortgage lenders and mortgage servicers aren’t necessarily the same.
You might be asking what feels like an odd question: “Why did my mortgage sell?”
While it may feel surprising, there is no need to stress: Mortgages are bought and sold all the time. If you receive a notice that your mortgage has been sold, the terms of the loan — your interest rate, monthly payment (principal and interest only), and remaining balance — will not change.
What Happens When Your Mortgage is Sold
When your mortgage is sold, a new company is typically buying the servicing rights.
Those rights include collecting and processing the payments, along with the additional regular duties that come with mortgages. Those duties may include making disbursements from an escrow account to taxing authorities and property insurers. There are some entities that specialize in taking care of those servicing obligations.
Prior to your mortgage selling, you will receive a notice regarding the new servicer. Federal law dictates that you must receive a notice about the change at least 15 days prior to the switch. Then, within 30 days, the new owner of the mortgage is required to send you its name, address, and contact number.
Why Lenders Sell or Transfer Mortgages
Many lenders specialize in originating the loan, but often the initial lender can not afford to wait for the loan to be paid in full.
By selling the loan, lenders no longer have to keep your debt on their books. Lenders can also offer loans to other prospective homeowners.
While you are focused on your individual mortgage, your debt is part of a much larger web of other debts. It is a financial instrument, much like a bond that can be bought and sold between investors. In fact, that debt may be sold multiple times, and you may not even realize it. Behind the scenes, your loan could be packaged with other loans and sold as part of a mortgage-backed security.
This all starts to feel complex for individual homeowners, but the goal is simple: to ensure that funds continue to flow through the housing market and loans are available to qualified borrowers.
What To Do When Your Mortgage is Sold
Do not worry if you receive a notice that your mortgage has been sold.
The terms of the loan—your interest rate, monthly payment, and remaining balance—will not change. The only difference you’ll notice is where the payment is sent. Watch out for notifications related to updating your payment information. You may need to redirect your ACH withdrawal to a different entity or mail a check to a new address. If you recently sent a payment to the previous owner of the mortgage, you will not be penalized. There is a 60-day grace period after servicing rights have been sold.
In addition to updating your information for future payments, it is smart to keep a copy of statements relating to the time frame in which the mortgage was sold from and transferred to a new owner. By keeping documentation, you can prove that you submitted payments on time in the event of any confusion.
The Bottom Line
Lenders selling loans is a common occurrence. This is done for a variety of reasons, including seeking the ability to offer new loans.
Although you’ll be notified when this happens, nothing will be different for you unless your loan servicer also changes.
Loan servicers are the entities that collect your mortgage payments and manage your escrow accounts, among other duties. When your loan servicer changes, you’ll receive a 15-day notice. After, you’ll start to make payments and interact with your new mortgage servicer.
Frequently Asked Questions
Can you stop your mortgage from being sold?
No, you do not have the ability to stop your mortgage from being sold.
How do I find out who owns my mortgage?
You can contact your servicer to find out who owns your mortgage. You can also check online to see if your mortgage is owned by Fannie Mae or Freddie Mac.
Why does my mortgage keep getting sold?
The secondary market is very active. Lenders will buy and sell mortgages for a variety of reasons.