If you’ve received a letter saying your mortgage has been sold, you’re not alone. It’s actually quite a common occurrence. And while it can certainly be worrisome to know your loan has changed hands without your say-so, it’s not a cause for alarm. Here’s what you need to know and how to proceed.
- Banks, credit unions, and other lenders are mortgage originators, while mortgage servicers handle your payments and escrow accounts.
- Reselling mortgages frees up money for lenders to offer new mortgages and keeps interest rates lower, and it is common for the majority of home loans.
- Lenders must notify you before your loan is sold, while a new servicer must notify you within 15 days of the sale and a new owner within 30 days.
- Your interest rate and loan terms should stay the same after a sale, but where and when to send payments or how escrow is calculated may change.
Why Was My Home Mortgage Sold?
Banks, credit unions, and other lenders lend money for houses on what’s called the “primary market.” They are known as mortgage originators or lenders. On the other hand, mortgage servicers are the ones who handle your mortgage payments and escrow accounts. Some originators are also servicers, while others are not.
After the original loan is established, the lender can either keep the loan in their own portfolio, or sell it on the “secondary mortgage market,” either individually or grouped with other mortgages. Outside investors, either based in the U.S. or abroad, often buy these loans.
Below is an example breakdown of the process.
- Lender A gives you a $300,000 mortgage loan.
- Lender A sells that loan, either alone or with 100 other similar ones, to Investor B.
- This frees up another $300,000 to $30 million for Lender A to sell more mortgages.
The secondary market also helps support a stronger, more resilient primary housing market on the whole. Reselling mortgages frees up money for new mortgage originations and lowers interest rates.
Congressionally created mortgage funders and repackagers, like Fannie Mae and Freddie Mac, are among the most common purchasers in the secondary marketplace, though other investors exist, too.
How Will I Find Out if My Mortgage Is Sold?
Lenders are legally required to notify you of your loan sale before it happens. You should get a notice in the mail at least 15 days prior to the official transfer.
Your loan may be owned and serviced by the same company, or two different companies. The new servicer of your loan must also send notification within 15 days of the sale.
If there’s a new owner of your loan, they must send notification within 30 days of taking over your loan, which will include:
- The new owner’s name, address, and phone number, and the person authorized to fix loan payment issues and receive legal notices
- The date the owner takes possession and where the transfer is recorded
What the Loan Sale Means for You
As a homeowner, it can be frustrating to find out that your mortgage has been sold. After all, you likely put lots of time and effort into finding the right lender, and discovering you’ve been passed off with little notice can be quite disappointing.
Fortunately, the loan transfer shouldn’t impact your rates or terms included in the original agreement. The servicer may only change servicing-related details, such as where you send your payments, your payment date, and in certain situations, the way that escrow is calculated.
The new servicer may conduct an escrow account analysis to understand the balance within the account and determine a surplus, shortage, or deficiency. If the servicer determines any such balance, or if escrow terms or accounting formulas change, the servicer must provide you with your first escrow document within 60 days of the transfer. All other loan terms will remain the same.
Due to the change in payment addresses and possible due dates, you’ll have a 60-day grace period on any late payments or payments that went to the wrong servicer. You can’t be charged any late fees or penalties during this time.
What to Do When Your Mortgage Is Sold
Once you receive the notification that your loan is being sold, read it carefully. Note the date that your old lender will stop accepting payments and when your new loan servicer will take over. You should also note any changes in your payment date, and be sure all your personal information is correct on the contained documents.
Then, adjust your payment method accordingly. If you have auto draft or bill pay set up through your bank, change the payment dates, addresses, and account numbers to reflect your new servicer. You should also set up an online account with your new servicer so you can monitor your loan and track your payments.
Finally, follow up with your tax authority and insurance company to be sure they’re aware of the change. If you pay your property taxes or home insurance with your mortgage, make sure everything is updated so that no payments are late or missed.
Submit a Qualified Written Request to your old and new servicers if you don’t receive a notice of transfer, your payments aren’t being applied correctly, or your old servicer was in the process of reviewing your loss mitigation application to help you with loan modifications or to avoid foreclosure or a short sale.
Unfortunately, you don’t have any control over whether your loan gets sold. If you’re unhappy with the new loan owner, you could consider refinancing with a new mortgage company. But remember this would require another mortgage application with a comprehensive check into your financial profile and credit history, as well as additional fees.
The Bottom Line
It’s very common for mortgage loans to be sold, and it’s not a cause for alarm. You should receive notice in the mail both before and after the sale takes place. Pay close attention to the notice, check it for errors, and adjust your payment method so that it accurately reflects your new payment date and address. Finally, make sure your local tax authority and home insurance company are aware of the servicer change, too.