Key Points:
– Mortgages are frequently sold to other entities to allow lenders to free up capital for issuing more loans.
– The trade of mortgage-backed securities in the secondary market ensures a steady flow of funds in housing and financing sectors.
– Homeowners have rights under RESPA to receive details on the transfer of their mortgage.
Before you secured your mortgage, you diligently monitored interest rates, compared various lending options, and carefully reviewed the terms to secure the best possible deal. Despite all your effort in selecting a lender, you might now find yourself pondering an unexpected question: Why was my mortgage sold?
Although it may come as a surprise, there is no cause for alarm. It is a routine occurrence for mortgages to change hands. Here’s the reasoning behind it and the steps you can take.
Why are mortgages sold?
While many lenders specialize in originating mortgages, they often cannot afford to wait several decades for borrowers to repay them in full. By selling these loans, lenders can remove them from their balance sheets and extend loans to other potential homeowners.
Although you may view your mortgage as a personal financial obligation, it is part of a broader network of debts. Similar to a bond, mortgages can be bought and sold among investors. In some instances, your loan may be bundled with others and traded as a mortgage-backed security (MBS). This activity within the secondary market facilitates a continuous flow of funds in the housing and financing sectors.
The mechanics of the secondary mortgage market may seem intricate, but the objective is straightforward: to maintain the circulation of funds within these sectors. MBS investors earn income from the mortgage payments, while lenders receive cash to issue loans to new borrowers.
Implications of a mortgage sale
When a mortgage is sold, a new entity typically acquires the servicing rights. These rights entail managing payment collection, processing, and other associated responsibilities. Certain organizations specialize in fulfilling these servicing duties.
Upon the sale of your mortgage, you will be notified of the new servicer. Federal regulations mandate that you receive this notification at least 15 days before the transition. Additionally, within 30 days, the new mortgage holder must furnish you with their contact information.
Protecting yourself during a mortgage sale
If you receive a notice indicating the sale of your mortgage, there are steps you can take to safeguard your interests. While changes in the loan terms are unlikely, errors can occur. It is essential to:
– Thoroughly review the notification, particularly regarding the change in servicer.
– Confirm the accuracy of the information provided by the previous servicer.
– Update your payment procedures as necessary.
Keeping abreast of these details will help ensure a smooth transition when your mortgage changes hands.
If you need to change your ACH withdrawal for auto-payments or send payments to a new entity or address, make sure to double-check the effective dates. Keep track of when old payments should stop and new ones should begin. After a mortgage servicing transfer, there is usually a 60-day grace period for payments to the previous owner. Save receipts and statements from the sale to prove payment submission in case of confusion.
Verify that the first new payment goes through and reach out to the new servicer if anything is unclear. To find out who currently owns your mortgage, check your mortgage statement, review closing documents, contact your loan servicer, or use online tools like those offered by Fannie Mae, Freddie Mac, or MERS. Homeowners typically cannot prevent the sale of their mortgage, but have rights under RESPA regarding notices and information about transfers. If your mortgage is sold to a problematic company, contact them directly or file a complaint with the CFPB. The sale of your mortgage does not impact your credit score, but monitor your account to ensure accurate payment crediting during the transition.
If you come across payment processing errors or discrepancies in your account statements following the sale of your mortgage, it is crucial to get in touch with the new servicer promptly and work together to resolve the issue as soon as possible.
