Can My Mortgage Company Sell My Loan?
Your mortgage loan might be sold, but your core terms are protected. Get an overview of this common process and how it impacts you as a borrower.
Mortgage companies commonly sell loans as part of regular business operations. While the ownership of a mortgage loan may change hands, the fundamental terms and conditions of the loan typically remain the same for the borrower.
Understanding Mortgage Loan Sales
Mortgage loans are financial assets that lenders often sell to free up capital, manage risk, or generate revenue. This process occurs in the secondary mortgage market. In this market, lenders sell originated mortgages to investors or other financial institutions. This allows the original lender to replenish funds, enabling them to issue new loans to other borrowers and maintain liquidity in the housing market.
Government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac are significant participants in the secondary market. They purchase mortgages from lenders, pool these loans, and then sell them as mortgage-backed securities (MBS) to investors. It is important to distinguish between the loan owner (the investor) and the loan servicer, which handles day-to-day administrative tasks like collecting payments. Often, the original lender may continue to service the loan even after selling its ownership.
How a Loan Sale Affects You
When a mortgage loan is sold, the core terms of the mortgage do not change. Your interest rate, principal balance, payment schedule, and the type of loan you have all remain the same. The original mortgage contract you signed is still legally binding, regardless of who owns the loan. This provides stability, ensuring your financial planning remains unaffected by the change in ownership.
What may change is the loan servicer, the entity you send monthly payments to. If the servicing rights are transferred along with the loan ownership, you will receive notifications from both your old and new servicers. Escrow accounts, which hold funds for property taxes and insurance, are typically transferred to the new servicer, and your obligations related to these accounts remain consistent.
Your Protections When a Loan is Sold
Federal laws provide specific protections for borrowers when their mortgage loan is sold or transferred. The Real Estate Settlement Procedures Act (RESPA) requires servicers to provide a “Notice of Transfer of Loan Servicing” to borrowers. This notice must be sent by the transferor servicer at least 15 days before the effective date of the transfer, and the transferee servicer must send one no more than 15 days after the transfer date. The notice includes the effective date, new servicer’s name and address, and contact information for inquiries.
A 60-day grace period is in place following a servicing transfer. During this period, if you mistakenly send your mortgage payment to the old servicer, the new servicer cannot treat the payment as late or charge late fees. This grace period helps to prevent penalties during the transition.
Borrowers also have the right to send Qualified Written Requests (QWRs) to their servicer to request information or dispute errors related to their account. The servicer must acknowledge a QWR within five business days and generally respond within 30 business days. The Consumer Financial Protection Bureau (CFPB) oversees mortgage servicing and enforces these consumer protection rules.