Why did your mortgage lender sell your loan? (2024)
If you’ve ever taken out a mortgage, there’s a good chance the lender who made the loan to you sold it to another bank or investor before you made your first payment. There’s also a good chance that if you’ve had your mortgage for a few years, it may have been sold at least one or two more times. Why all the paper shuffling? The answer is fairly straightforward.
Lenders typically sell loans for two reasons. The first is to free up capital that can be used to make loans to other borrowers. The other is to generate cash by selling the loan to another bank while retaining the right to service the loan. Cash is generated when the old lender charges the new lender a fee for collecting and disbursing the monthly payments. In the end, your loan could be owned by lender “A” while you make payments to lender “B.”
On a personal note, I once obtained a mortgage loan from one of the local community banks here in Las Cruces. I was informed at the closing that my loan had already been sold to what financial guru Clark Howard calls a multi mega-bank (MMB). In turn, the MMB sold the loan to the General National Mortgage Association (Ginnie Mae). Until the mortgage was paid off, I continued to make my monthly payments to the MMB, who retained the servicing rights, even though Ginnie Mae is the owner of my loan.
Federal law protects borrowers when loans are bought and sold by requiring that both the old and new lenders notify you in writing within 15 days of a sale that a transfer has taken place. The letters should provide the name of the new lender, how and where payments can be made, and when your next payment is due. You should continue making payments to your old lender until you receive the letter from the new lender. While the loan is being transferred, borrowers are afforded a 60-day grace period that prohibits the new lender from collecting late fees or declaring a loan delinquent. In addition, the terms of your original mortgage are set in stone and cannot be modified by the new lender or servicer.
If payments are not credited properly or some other issue arises during or after the transfer, it’s up to you to pursue a remedy in a timely manner. Step one is to notify the new lender in writing. The letter should be addressed to the customer service or other department designated by the lender to receive correspondence, and should not be included with your regular monthly payment. The lender is required to respond within 20 days of receiving your letter. Lenders also have 60 days to resolve the problem if the issue requires extraordinary efforts to investigate.
Not satisfied with your lender’s response? Step two is to file a complaint with the Consumer Financial Protection Bureau, or CFPB (www.consumerfinance.gov). The CFPB requires that your lender address the complaint within 15 days of when they receive notification from CFPB. Complaints having to do with fraud, unfair business practices or identity theft can be filed with Federal Trade Commission (www.ftc.gov/complaints) or the New Mexico Attorney General’s office (www.nmag.gov/file-a-complaint.aspx).
So, who owns your mortgage? There are three ways to find out. First, call or write to your servicer. Most have a secure email option on their website through which you can ask. I did just that while doing research for this column and received a response within 30 minutes. You can also ask Freddie Mac (www.freddiemac.com/mymortgage or 1-800-FREDDIE) and Fannie Mae (www.knowyouroptions.com/loanlookup or 1-800-2FANNIE) if they own your loan.
If all else fails, contact the folks at Mortgage Electronic Registration Systems, Inc. (www.mersinc.org or 1-800-679-6377). MERS Servicer ID is a free service that provides information on the current servicer and investor (owner of the note) for loans registered on the MERSSystem.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at (575) 642-2292 or Gary@GarySandler.com.
More Real Estate Connection:
Are you a landlord with a no pet policy? You may have to make an exception
The answer is fairly straightforward. Lenders typically sell loans for two reasons. The first is to free up capital that can be used to make loans to other borrowers. The other is to generate cash by selling the loan to another bank while retaining the right to service the loan.
Why do mortgages get sold? Many lenders specialize in originating a mortgage, but often, this initial lender can't afford to wait for 15 or 30 years for you to pay it all back. By selling it, they no longer have to keep your debt on their books, and they can offer loans to other prospective homeowners.
loans originated in the primary Market Market can be bought, sold or traded in the secondary mortgage Market. Primary lender sell their notes to generate more money to make more loans. secondary mortgage Market consists of holding Warehouse agencies.
Federal banking laws and regulations permit banks to sell mortgages or transfer the servicing rights to other institutions. Consumer consent is not required.
You should continue making payments to your old lender until you receive the letter from the new lender. While the loan is being transferred, borrowers are afforded a 60-day grace period that prohibits the new lender from collecting late fees or declaring a loan delinquent.
A mortgagee sale happens when a person can't pay back money they owe to the bank. The bank sells their property to get back the money it's owed. The mortgagee sale process is different to the normal process of selling a rental property. Selling a rental property.
Mortgage sales are allowed under federal law and are common in the lending industry. A mortgage sale won't change your rates or mortgage contract, but it might affect you or your credit history if you don't get the proper notices or if the new or old mortgage servicer makes a mistake.
It's common for lenders to sell mortgages to reduce the amount of risk that's on their books. Once the lender sells the mortgage, they can earn back the money they loaned, enabling them to sell more mortgages.
The secondary mortgage market is a marketplace where investors buy and sell mortgages that have been securitized — that is, packaged into bundles of many individual loans. Mortgage lenders originate loans and then place them for sale on the secondary market.
The secondary market provides investors and traders with a place to trade securities after they are put up for sale on the primary market. Investors trade securities on the secondary market with one another rather than with the issuing entity.
' Many mortgage lenders routinely transfer loans to other companies who have the capability to better service the loan over its lifetime. Your mortgage isn't being singled out, but more likely is simply one among many in a very large transaction.
Lenders sell mortgages so they have money to lend to other borrowers. Some sell loans to other financial institutions but keep the servicing rights. In this case, the customer deals with the same lender and sends the payments to the same place. It hardly affects consumers, since the point of contact doesn't change.
Fannie Mae buys loans from lenders, replenishing the lenders' funds so they can provide new mortgages for more homebuyers. Your mortgage servicer — the company that you send your monthly payments to — and your loan terms remain the same when we purchase your loan.
It's common practice to sell mortgages so that lenders can get more money to help finance additional mortgages. The process is cyclical and continues from there. When lenders sell loans, they're able to take this debt from their balance sheet and free up their credit for new customers.
Once your debt has been sold you owe the buyer money, not the original creditor. The debt purchaser must follow the same rules as your original creditor. You keep all the same legal rights. They cannot add interest or charges unless they are in the terms of your original credit agreement.
Simply calling the collector won't cease collection activities. If possible, send your dispute letter by certified mail (with "return receipt requested") so you know it was officially received by the collector. The collector then has 30 days to determine whether or not the disputed item is correct.
You might be surprised or even upset to receive a letter telling you that your mortgage is being sold to another financial institution. There's nothing inherently bad about your loan being sold — the terms of the loan will not change.
key takeaways. A transfer of mortgage is the reassignment of an existing mortgage from the current holder to another person or entity. Not all mortgages can be transferred to another person. If a mortgage can be transferred, the lender has the right to approve the person assuming the loan.
When a loan is sold in its whole, the lender receives a one-time payment but no longer receives interest or principal payments from the loan. But, if only a piece of the loan is sold, the lender will still get some payment right away while still collecting interest on the remaining balance.
Introduction: My name is Greg O'Connell, I am a delightful, colorful, talented, kind, lively, modern, tender person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
