Your mortgage lender likes when you make your payments each month. But your lender often doesn’t really make the big bucks from your loan until it sells it to Freddie Mac, Fannie Mae or some other financial institution. So don’t be surprised if some time from now, you get a notice in the mail telling you that your lender has sold your loan to another financial institution.
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If you receive this kind of notice, not to worry. You shouldn’t be surprised or alarmed, even if you were aiming to pay off your mortgage early. Your life won’t change drastically when your bank sells your loan. You’ll still make the same payments, just to a different address.
Why Banks Sell Mortgages
Banks make money off your mortgage loan by collecting interest payments. Hopefully you did research before you purchased your home to figure out which mortgage was best for your financial situation. Say you’ve taken out a 30-year fixed-rate loan of $200,000 at an interest rate of 4 percent. You’ll pay more than $140,000 in interest if you take the full three decades to pay off your loan.
That might seem like good money. But waiting 30 years to collect a total of $140,000 doesn’t always seem that enticing to banks. So if they want to make a quicker profit, they’ll sell your mortgage loan for a commission. That provides instant cash.
Your lender might also sell your loan as a way of freeing up capital. When banks sell loans, they are really selling the servicing rights to them. This frees up credit lines and allows lenders to pass out money to other borrowers (and make money on the fees for originating a mortgage).
Remember, lenders and banks might be making big profits, but they don’t have a limitless amount of money lying around. They sometimes need to ditch existing loans – such as your mortgage – to be able to have enough cash to lend to other customers.
What It Means For You
When your lender sells your loan, you’ll still make the same payment every month. You’ve already borrowed the money and closed the loan, after all. Even if your loan servicer has their own mortgage rates, having a new servicer doesn’t change what you’ve borrowed, what interest rate you’ve agreed to and how large your monthly payment is.
Once your lender sells your loan, it will send you a loan ownership transfer notice. The institution that purchased your loan must then notify you within 30 days of the official date of the change. This notice will include the name of the company that now owns your mortgage loan, its address and its telephone number.
The only time problems might arise is if your old or new servicer doesn’t notify you in time about the new address to which you need to send your payments. After all, you don’t want a late payment on your record because you sent your payment to your old servicer and not your new one. If you do have a complaint about late notices or any other issue relating to the selling of your loan, don’t be shy: Report your complaint to both your old lender and your new one. Then file a mortgage complaint form with the Consumer Financial Protection Bureau.
And if you do receive notice that your loan has been sold, don’t panic. Just make sure you know who owns your loan now and where your payments need to go each month.
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