Why Does My Mortgage Keep Getting Sold?

Mortgage lenders regularly sell off mortgages to improve liquidity. While the secondary mortgage market is essential to keep interest rates down and offer mortgages to more borrowers, getting a notification that your mortgage has been sold to a new lender can still be startling. If you're scratching your head, you're not alone. While mortgages are sold regularly, understanding the reasons behind the sales can help alleviate any concerns. Below is an overview to answer, "Why does my mortgage keep getting sold?" Read on to understand how it impacts you and what you can do. 

Understanding the Major Players in a Mortgage Transaction

To grasp why mortgages get sold, it's essential to understand the major players in the mortgage industry and how these major parties are involved in the process.

Lenders

Lenders are the financial institutions that initially provide the mortgage loan to borrowers. They can be banks, credit unions or specialized mortgage companies. Lenders finance your loan. Then, these institutions earn money over the life of the loan via interest charges plus any origination fees. Find some of the best mortgage lenders here. 

Aggregators

Aggregators, also known as mortgage brokers or mortgage originators, act as intermediaries between lenders and borrowers. They help borrowers find suitable lenders and facilitate the loan application process. These professionals may work for the financial institution or independently. Aggregators are paid through commissions or fees. 

Investors 

Investors are entities that purchase mortgage loans from lenders. These can be government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac or private investors such as banks, pension funds and investment firms. 

Some investors purchase individual mortgages directly from lenders while others invest in mortgage-backed securities (MBSes). In the case of mortgage-backed securities, individual mortgages are purchased by either Freddie Mac or Fannie Mae and bundled into securities. You'll interact with the bank that handles the loans. Then, the bank sells mortgages at a discount. These loans are packaged as MBSes and offered to investors as a type of collateralized bond.

Servicers

Servicers are companies responsible for managing the day-to-day operations of mortgage loans, including collecting payments, handling escrow accounts and communicating with borrowers. Servicers will collect your monthly payments, keeping the payments for taxes or private mortgage insurance in escrow until the funds are due. 

Servicers can help you find additional options if you become delinquent on your loan. Your mortgage servicer may be the same as your lender or different. Servicers generally charge around 0.25% of monthly mortgage payments. 

Why Do Mortgages Get Sold? 

Mortgage lenders often sell mortgages to investors to improve liquidity and replenish funds to offer more mortgages. Here is an overview of the most common reasons mortgages get sold: 

1. Replenish funds: By selling mortgages, lenders replenish their cash reserves so they can continue lending to new borrowers.
2. Risk management: Selling mortgages allows lenders to transfer the long-term risk of the mortgage loans to investors and choose other investment vehicles or issue new mortgages.
3. Liquidity: Mortgage sales provide lenders with liquidity, enabling them to maintain a healthy bank cash flow.

Can You Stop Your Mortgage From Being Sold?

Lenders have the right to sell mortgages, and it is a common practice in the industry. Borrowers cannot prevent their mortgages from being sold. However, the terms of your mortgage, including the interest rate and payment schedule, remain unchanged when the mortgage is sold. Your ability to live in your home and pay off the mortgage isn't directly influenced by your mortgage being sold. 

What Happens When Your Mortgage Is Sold

When your mortgage is sold, the new owner, such as an investor or servicer, takes over the rights and responsibilities associated with your loan. This means that you will start making your monthly payments to the new servicer, and it will handle all communication and loan-related matters moving forward.

It's important to note that the sale of your mortgage does not affect the terms of your loan agreement. Your interest rate, payment amount and other terms remain the same as outlined in your original contract. If you use a loan servicer, you will usually continue to make payments to them. 

In some cases, your servicer could change. Then, you’ll want to make sure that the new servicer complies with federal regulations related to your loan. For example, it is required to give you timely information about your mortgage and correctly credit your loan payments. 

In some states, like California, companies must hold a license to service mortgages. You can verify these licenses on state databases to ensure they are legitimate loan servicers. 

What to Do After Your Mortgage Is Sold

If you receive a notification that your mortgage has been sold, here are some steps you should take:

• Review the transfer notice: Carefully read the notification letter, which should provide details about the new servicer, its contact information and any changes to your payment process.
• Update your payment information: If instructed, update your payment method (automatic bank draft, online bill pay) with the new servicer's information.
• Request a payoff statement: If you plan to pay off your mortgage soon, request a payoff statement from the new servicer.
• Keep records: Keep copies of all correspondence and payments related to the mortgage transfer for your records.
• Contact the new servicer: If you have any questions or concerns, reach out to the new servicer's customer service department.
• Check your credit report: Monitor your credit report to ensure that the transfer is properly reflected and that no errors or discrepancies arise.
• Update your homeowners insurance: Notify your insurance provider of the mortgage transfer and update the records with the new servicer's information.

Ways to Find Out Who the Owner of Your Mortgage Is

It’s important to know who your loan servicer is. If you need to know who owns your mortgage, there are several ways to find out. 

Review Closing Documents

Look through your closing documents or mortgage paperwork for information about the original lender or investor. This will provide information about your current mortgage servicer and other details about who holds the mortgage. 

Check Your Mortgage Statement

You should check your monthly mortgage statement, especially if you believe you've already changed mortgage services. The monthly statement should indicate the name of the current servicer and the owner of your loan. You can call to verify information, including payment information. 

Contact Your Loan Servicer

If you know your loan servicer but not the mortgage owner, you can call your loan servicer directly and ask it to provide information about the current owner of your mortgage. It is required to provide this information. If you have access to an online account or app through your loan servicer, you should also be able to find that information within your account details. 

Search Online Databases 

While you rarely need to search for the mortgage owner if you're in contact with the servicer, there are ways to find that information without contacting the servicer. You can search online databases to see who owns your mortgage. Websites like the Mortgage Electronic Registration Systems (MERS) offer online database search tools where you can search for information about your mortgage's ownership. 

Should You Worry If Your Mortgage Is Sold?

No, it's not worth worrying about a sold mortgage. Your home loan is safe. While having your mortgage sold can be unsettling, it's a common practice in the mortgage industry. Double-check the loan servicer and payment details, and contact them directly to verify information if necessary. 

By understanding the roles of different players and the reasons behind mortgage sales, you can approach the process with confidence. Remember, even if your mortgage is sold the terms of your loan remain unchanged. Keeping open communication with your new servicer can ensure a smooth transition and seamless transfer of payments to the new servicer. Preparing to buy your first home? Find some of the best lenders for first-time homebuyers. If you need a reverse mortgage, check out some of the best options. 

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