What Happens If My Mortgage Is Sold?
If you’ve just learned that your mortgage has been sold, relax. There is nothing that you need to do. Selling mortgage loans is common in the mortgage industry, and the terms and conditions of your original loan are protected by law. They can’t be changed, including your interest rate and repayment period. Also, your credit rating will not be affected by the sale.
If you have a fixed rate mortgage, your monthly payments will continue to be the same. If you have an adjustable rate mortgage, your payments will be subject to change, based on the terms of the original loan. So you won’t have any surprises.
Have mortgages always been sold?
Not always. Many years ago, a homebuyer would likely get a mortgage from his or her local bank, savings and loan or credit union. Typically, it would be the financial institution where the homebuyer already had checking and savings accounts, so a relationship was already established. Homebuyers would essentially be borrowing from their neighbors, and each mortgage payment would stay in the community to assist other borrowers.
Today, the mortgage industry is not only local, but also national and even international. A “secondary mortgage market” now connects homebuyers with mortgage funds available from across the country and around the world.
Via this secondary market, mortgage lenders and investors come together to make more money available for more borrowers. And that’s important, because if lenders couldn’t sell their loans in the secondary market, it would limit the amount of money they have available to lend. That could make it harder for people to obtain mortgages, as well as increase their costs.
In short, the secondary mortgage market, which includes Fannie Mae and Freddie Mac, is vital to the modern real estate industry and the American economy in general. You shouldn’t be concerned at all if your mortgage is sold.
What exactly is sold?
Your mortgage actually includes two parts: the interest you pay and the servicing of your loan, which includes collecting monthly payment, managing the escrow account (which covers your property taxes and homeowner’s insurance) and customer service. Some lenders will sell both parts of your mortgage, while others will sell only the servicing.
If you’re been informed that your loan servicing has been sold, you will likely need to send your monthly payments to a new company and address. So check for that information on your notification letter.