Can a Lender Sell Your Mortgage?
Learn how mortgage ownership changes hands, its impact on your loan, and your protections as a borrower.
A mortgage represents a financial commitment for a homeowner. It secures the loan with real estate and functions as a financial asset for the lender. Like other financial assets, mortgages can be sold. This common practice often raises questions for borrowers about their loan’s future.
The Legality and Commonality of Mortgage Sales
Lenders legally and commonly sell mortgages. When a mortgage is sold, ownership of the loan (the promissory note) changes hands. This means the entity to whom the borrower owes money might change, but the terms of the original loan agreement remain in effect.
Lenders sell mortgages to free up capital for new loans, manage financial risk, and diversify portfolios, which helps them maintain liquidity and optimize balance sheets. The sale often separates the loan’s owner (the investor) from the company collecting payments and managing the loan (the servicer).
The servicer handles the day-to-day operations of the mortgage, such as collecting monthly payments, managing escrow accounts, and providing customer service. While the original lender may also be the servicer, a mortgage sale often results in a new company taking over these responsibilities.
Impact on Your Mortgage Terms and Payments
When a mortgage is sold, the loan agreement’s fundamental terms remain unchanged. The interest rate, principal balance, loan term, and repayment schedule are fixed by the original promissory note and do not change with ownership transfer.
The most noticeable change for the borrower typically involves where they send their monthly payments. A new servicing company will likely take over payment collection, escrow management for taxes and insurance, and customer inquiries. This transition may also result in a new loan identification number.
The customer service experience might differ with a new servicer, as they may have different online portals, phone systems, or approaches to borrower support. Any existing escrow balance held by the previous servicer must be accurately transferred to the new servicer, who is obligated to manage these funds according to the original loan agreement.
Borrowers remain bound by all covenants and responsibilities in their initial mortgage agreement. The sale does not relieve them of their obligation to make timely payments or adhere to other loan conditions.
Borrower Rights and Protections
Federal laws, primarily the Real Estate Settlement Procedures Act (RESPA) and its servicing rules, provide safeguards for borrowers during a mortgage transfer. These regulations ensure that borrowers receive proper notice and protection during the transition.
Both the old servicer (transferor) and the new servicer (transferee) must notify the borrower of the transfer. The transferor must send a “Goodbye Letter” at least 15 days before the transfer’s effective date, and the transferee must send a “Hello Letter” no more than 15 days after. These notices must include the effective date, the new servicer’s name, address, and toll-free contact number, and the date the new servicer will begin accepting payments. They must also state that the transfer does not affect the mortgage’s terms or conditions, except those related to servicing.
A mandatory 60-day grace period exists after the transfer’s effective date. During this period, if a borrower mistakenly sends a timely payment to the old servicer, it cannot be treated as late, nor can late fees be imposed. The new servicer must also promptly respond to qualified written requests (QWRs) from borrowers. A QWR is a formal written communication about account errors or information requests, which the servicer must acknowledge within five business days and respond to within 30 business days.
Navigating the Mortgage Transfer Process
When a mortgage transfer occurs, borrowers should carefully review all notices from both servicers. Cross-reference the information in “Goodbye” and “Hello” letters to ensure consistency. If there are doubts about the new servicer’s notification, contact the old servicer using a verified phone number to confirm the transfer.
Borrowers should update payment methods to reflect the new servicer’s information, including adjusting automatic payments, bill pay services, or setting up new online accounts. Maintain meticulous records of all transfer notices, payment confirmations, and correspondence with both servicers.
Monitor monthly statements from the new servicer to confirm payments are correctly applied and escrow accounts are managed accurately. Establish communication with the new servicer, using their provided contact information, for any questions or issues. Promptly address any discrepancies or problems directly with the new servicer for efficient resolution.