You might feel confused or alarmed if you receive a letter telling you that your mortgage has been sold. This is actually a very common practice, and it will have little or no effect on you.
What It Means When a Mortgage Gets Sold
Lenders often sell mortgages in groups to investors, such as Fannie Mae, Freddie Mac, insurance companies, brokerage firms, mortgage real estate investment trusts, and other entities. This gives mortgage lenders the liquidity they need to keep issuing new loans.
Lenders don’t want to tie up all their credit or receive interest payments a little at a time over several years or decades. They need to have continuous access to funds so they can keep providing loans to new customers. The process of selling mortgages helps the mortgage industry operate efficiently.
How You Can Be Affected If Your Mortgage Is Sold
If your mortgage is sold to an investor, you won’t see any change in the terms of your loan. The length of the mortgage, the interest rate, your monthly payment amount, and the other terms that you agreed to will stay the same.Â
The way that you pay your mortgage might change. To understand how, it’s important to note the distinction between a mortgage lender and a loan servicer.Â
Your mortgage lender is the financial institution that issued your home loan, and your servicer is the company that collects and processes your payments. They might be the same company, or your lender might have a different company process mortgage payments on its behalf.Â
When your mortgage is sold, your servicer might change, or it might not. If your servicer will change, you will be notified weeks before the date when the switch will occur so you’ll have time to prepare.Â
You will be instructed to begin sending payments to a different company starting on a designated date and will be given instructions on how to do so. You might have to create an online account with the new servicer, set up automatic payments, or mail your checks to a different address. You will be given the new loan servicer’s contact information so you can reach out if you have any questions.
If your loan is sold and your servicer will remain the same, nothing will change from your perspective. You’ll keep sending payments to the same company after your mortgage is sold.Â
Pay Attention to Communications Regarding Your Mortgage
Review any letters that you receive related to your home loan. If you learn that your mortgage has been sold, make sure that you understand what effect, if any, that will have on your loan servicer. If you have to take action, do it well in advance so you won’t have to worry about late or misdirected payments.
