Does It Matter if My Home Loan Gets Sold?
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Once they’ve closed on their mortgage, many homeowners make their monthly payments and don’t think too much about what happens behind the scenes. But there’s a lot going on: Mortgage loans are constantly changing hands, bought and sold between mortgage lenders investors. It’s a little-known part of what makes the mortgage market work.
But if you’re not familiar with the process, you’ll likely have questions and concerns when another lender has purchased your mortgage loan, about what that means for you and your home.
If you have recently received notice that your mortgage has been sold, here’s what you need to know about how this can impact you, your home and the future of your loan — and whether it matters.
Mortgage owners vs mortgage servicers
Before we begin, a few quick definitions. There are usually two companies involved in your mortgage loan once you close — the mortgage loan owner and the mortgage servicer. They have two different roles.
The original owner of the loan is the company that gave you the money to purchase your home. They’re the ones who receive the money you pay every month. The servicer is the company that manages your loan, including processing payments and sending monthly mortgage statements. They get paid a fee for their work.
If the lender chooses, they can sell both ownership of the loan and the right to service the loan, or just one component.
Why mortgage loans get sold
The terms of a mortgage can vary, but most of the time you will find that they have loan terms ranging between 10 and 30 years. During this time, it is possible that it will be sold at least once, if not more.
This can happen for a few different reasons. The main one is to help mortgage lenders make more loans. Small banks and other lenders don’t have enough cash on hand to keep making long-term loans while waiting for them to be paid back over 30 years. That’s why they’ll package their loans up and sell them to larger companies or investors — most notably government-sponsored enterprises Fannie Mae and Freddie Mac. This is known as the secondary mortgage market.
There are other reasons, too. Things like bankruptcy and company closings can lead to the mortgage owner changing.
What happens when your mortgage gets sold
If your mortgage is being sold, you will be notified by both the buyer and the seller of the loan at least 15 days prior to the transfer date. If your loan has a new servicer, you will also be notified by both the old servicer and the new servicer 15 days prior to the transfer date.
These notifications, or transfer notices, will provide you with the name and contact information for the new mortgage lender and/or servicer, as well as details regarding how you’ll make your monthly mortgage payments and the date these changes will take effect.
After the official transfer date, payments are to be made to the new company listed in the transfer notices. Luckily, if you forget and mistakenly send your mortgage payment to the wrong party, you will not be charged a late fee during a a 60-day grace period. However, late charges may be assessed if you continue to send payments to the incorrect servicer or lender once the 60-day grace period has lapsed.
What to do if your mortgage gets sold
When your mortgage gets sold, it is your responsibility to thoroughly review the transfer notices to make sure you send future payments to the correct place. However, before you do that, you’ll want to confirm that your loan has in fact been sold — avoid becoming the victim of a scam.
Remember, you are supposed to receive notification from both the buyer and the seller of the loan or both the old and new servicer. This can be helpful in determining if the sale of the mortgage is legit. If you only get one notice, this is a red flag — especially if the notice you get is from your alleged new servicer or lender and states that you should change where you send your monthly payments.
If you have any concerns, it’s best to pick up the phone and speak to your current lender or servicer about the changes that have been made to your loan.
The bottom line
It can be alarming to receive a letter saying your mortgage is being sold, but it’s really not a cause for concern. There is actually very little that will change: you’ll mostly just be sending your payments to a new company.
The amount you pay, your interest rate and even the payment due date do not change. If your mortgage has been sold, the only thing that truly matters is that payments are made to the correct mortgage lender and/or servicer moving forward.