What Happens When a Mortgage Company Sells Your Loan?

When a mortgage company sells your loan, it is a routine and legal practice. Mortgage loans are frequently bought and sold among financial institutions to manage portfolios or free up capital. This process does not alter your mortgage agreement’s fundamental terms. Understanding these transactions can clarify concerns.

The Process of Loan Sale

Mortgage loans are sold in the secondary mortgage market. Lenders sell existing loans to investors or other financial institutions to generate liquidity for new loans. The original lender typically transfers servicing rights to another company.

When a mortgage loan is sold and servicing rights transfer, federal regulations mandate borrower notifications. Your current servicer must send a “Goodbye Letter” at least 15 days before the transfer’s effective date, detailing the new servicer’s name and address.

The new servicer must send a “Welcome Letter” within 15 days after the transfer’s effective date. This letter contains essential information: their name, contact details, payment start date, payment instructions, and your new account number. It confirms all other loan terms remain unchanged. Federal law provides a 60-day grace period after the transfer date, preventing late fees if you mistakenly send payment to the old servicer.

Impact on Your Mortgage

The sale of your mortgage loan primarily affects who receives your payments, not your loan’s core conditions. Your original promissory note, outlining interest rate, principal balance, and repayment schedule, remains legally binding. Your original maturity date and total repayment amount also stay the same. These terms are established in the initial loan agreement and do not change due to loan ownership or servicing rights transfer.

The primary change is a new mortgage servicer will collect monthly payments and manage your loan account, including customer service, payment processing, and escrow accounts. While the servicer changes, the underlying loan agreement between you and the original lender remains in effect; obligations and rights do not change.

For loans with an escrow account, funds for property taxes and homeowner’s insurance transfer with the loan. The new servicer manages these escrow funds, ensuring timely tax and insurance payments. They must adhere to the existing escrow agreement, including annual escrow analyses. Adjustments to escrow payments will still be based on changes in property taxes or insurance premiums, not the loan sale.

What You Should Do

Upon notification of your mortgage loan sale, take proactive steps for a smooth transition. First, carefully review both the “Goodbye Letter” and “Welcome Letter.” Compare information for consistency, especially the effective transfer date and new servicer’s details. Verify the new servicer’s legitimacy by checking official licensing databases or contacting your previous servicer.

Next, update payment methods. If automatic payments are set up, cancel them to prevent misdirection. Set up new arrangements with the new servicer via their online portal, mail, or direct debit. Ensure your first payment goes to the correct new address or account number.

Maintain thorough records during this transition. Keep copies of both letters and any subsequent correspondence. Document all payment confirmations and retain records of your new account number. This record-keeping is invaluable if discrepancies or questions arise.

Resolving Concerns

Issues can arise after a mortgage loan sale, such as misapplied payments or escrow discrepancies. If a problem arises, first contact the new servicer’s customer service by phone. Clearly explain your concern, providing your account number and relevant details. Document the call’s date, time, representative’s name, and conversation summary.

If informal communication doesn’t resolve your concern, escalate to a formal written request. Send a written “Notice of Error” or “Request for Information” to the servicer’s designated address. This formal communication should include your name, loan account number, a detailed description of the error or requested information, and any supporting documentation.

Federal regulations require servicers to acknowledge written requests within five business days and resolve or explain their position within 30 business days. If concerns remain unresolved after the servicer’s formal complaint process, consider reaching out to federal consumer protection agencies or state banking departments. These entities provide resources for consumers to report issues. They can offer guidance and, in some cases, mediate disputes when direct communication with the servicer has not yielded a satisfactory outcome.