Does this really Happen?
Imagine this: You went through the process of carefully comparing different mortgage lenders, making sure to choose the one that best suits your needs. But then, just after closing on your home, you receive a letter from a new company introducing themselves as your servicing provider. It can be quite unsettling, especially if you're a first-time homebuyer. You might start wondering if you did something wrong, if your lender is allowed to do this, or if your payment amount will suddenly change.
Well, let me put your mind at ease and provide you with some information on what it really means when your mortgage is sold to another company.
Why are mortgages sold?
From your perspective as a borrower, it usually means that the servicing of your mortgage has been transferred to a new company, and you'll be sending your monthly payment to them instead. The way this happens can vary depending on the mortgage originator you initially worked with. Some mortgage originators don't actually service loans, so they sell your loan shortly after it's funded to a mortgage servicer.
It's also not uncommon for your mortgage to be transferred from one mortgage servicer to another. Mortgage servicers earn fees for handling your account, and sometimes they decide to sell the rights to service your mortgage to another company. This has become a common practice and is often an option even for companies that claim to “Never sell your Loan”.
Do you give Consent?
You don't actually need to give your consent for your mortgage to be sold, and your loan can be sold multiple times. However, lenders are required to disclose whether your loan will be sold and how often they typically do so.
You might be thinking, "This all sounds a bit scary!" But trust me, it really shouldn't be. The terms of your loan will stay the same, unless you have an Adjustable Rate Mortgage (ARM) or another type of adjustable loan. In those cases, your payment amounts might change. However, if you don't have an adjustable loan, your payments will only change if factors beyond the scope of your loan, such as mortgage insurance or property taxes, change. These changes can happen regardless of whether your loan is sold to another company.
Curious who owns your mortgage?
This is where things can get a bit confusing. The company that originated your loan or the servicer may not actually own your loan. Nowadays, most home loans are guaranteed or issued by government-chartered companies like Fannie Mae, Freddie Mac, or the FHA. These companies purchase loans from lenders to free up money so they can lend to other mortgage borrowers.
But don't worry, as a borrower, you do have certain rights. Your current lender must provide you with a notice when your mortgage is sold. The new mortgage servicer must also notify you within 30 days of the transfer, providing you with their name, address, phone number, the date of transfer, and whether the transfer of ownership will be a public record. During the transfer of your loan, you have a 60-day grace period where you won't be charged a late fee if you accidentally send a payment to your previous mortgage lender. It's essential to carefully read the statement from your new mortgage servicer to ensure all the information is correct. If you spot any issues or errors, make sure to contact the new servicer right away.
The sale of your loan shouldn't cause any problems.
However, there are a few common issues to watch out for. First, be sure to avoid any confusion by reading all correspondence from your new servicer and noting when you need to start making payments to them. If you have any questions about who, when, and how to make your payments, don't hesitate to reach out to them. Also, be aware that when your lender changes, you might lose certain features like online account access or paperless statements that not every provider offers. Lastly, if you're in the process of a loan modification or refinance when your loan is sold, you shouldn't have to start over with your new servicer. Just keep accurate records of what you've sent and received to avoid any issues due to the transfer.
Pay attention to your mortgage.
I know it can get a bit confusing at times, but the ability to sell loans helps lenders and servicers stay stable and profitable, which ultimately frees up more funds for homebuyers like you. If your loan is sold, stay proactive by asking questions and keeping your new payment information organized. Paying attention to this straightforward process will lead to a stress-free transition for you and your new mortgage servicer.
I hope this information reassures you and helps you navigate the transition smoothly. Feel free to ask if you have any more questions or concerns. Good luck with your mortgage journey!