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The mortgage process
By Shelley Sines
April 2019
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Many first-time homebuyers don’t realize their loans will likely be sold to another mortgage loan servicing company after closing. In fact, a loan can be sold again and again (and again). Luckily, breaking up doesn’t have to be hard to do: Here’s a quick rundown of what you need to know in the event your mortgage loan is sold.
The company that collects your monthly mortgage payment is known as the servicing company. Sometimes lenders who fund mortgages will keep the loans on their books and function as the mortgage loan servicing company, too. But in many cases, lenders sell off their loans to other companies for servicing.
Why was my mortgage loan sold?
Don’t take it personally – to your lender, your loan is nothing more than another financial asset (no matter how good-looking it is). And in the case of a mortgage loan, you’re paying back the money you borrowed relatively slowly, usually over 15 or 30 years. By selling loans, lenders can quickly free up funds to lend to other potential buyers. Lenders often bundle loans together (usually those with similar risk attributes) and sell them to investors. These investing companies (typically government agencies like Fannie Mae and Freddie Mac) then sell them as bonds. In the big picture, this practice helps keeps rates competitive and boosts the economy.
Does my lender need to ask my permission to sell my mortgage loan?
To be blunt: nope. Federal banking laws allow financial institutions to sell mortgages or transfer the mortgage loan servicing rights to other institutions, and consumer consent isn’t required for them to do this.
That being said, your lender does need to notify you if your loan will be serviced by a different company. Both companies must send you notification no less than 15 days before the loan is transferred to the new servicing company. The new company must also provide contact details within 30 days after the transfer so you know where to send or make payment, and how to get in touch with them. In the midst of a transfer and worried you might send your check to the wrong company? You also have a 60-day grace period, so your loan won’t be delinquent if you happen to make a mistake with that first check.
How does having my mortgage loan sold change things for me?
In reality, having your loan sold to a new servicer won’t impact you much beyond writing a different name on the mortgage check or processing your monthly payment on a different website. The terms you agreed to at your closing – loan type, term and interest rate – will stay the same.
Overall, having your loan transferred to a new mortgage loan servicing company is very common and generally goes smoothly. I say “generally,” because mistakes can happen: If you notice your payment or loan terms have changed or something else doesn’t seem quite right, definitely contact the new company. If you can’t resolve the issue with them, you can also file a claim through the Consumer Financial Protection Bureau.
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