What Does it Mean When Your “Mortgage is Sold”? (2024)

FAQs

What Does it Mean When Your “Mortgage is Sold”? ›

When your mortgage is sold, a new company is typically buying the servicing rights. Those rights include collecting and processing the payments, along with all the additional regular duties that come with mortgages.

It's common practice to sell mortgages so that lenders can get more money to help finance additional mortgages. The process is cyclical and continues from there. When lenders sell loans, they're able to take this debt from their balance sheet and free up their credit for new customers.

Mortgages are bought and sold frequently in the mortgage industry. The sale of your mortgage loan to a new owner does not affect the terms or conditions of the mortgage contract.

When your mortgage is sold, you will send your payment to a new servicer. The loan terms and payment amount will stay the same when your loan is sold.

Federal banking laws and regulations permit banks to sell mortgages or transfer the servicing rights to other institutions. Consumer consent is not required. However, the bank or new servicer generally must comply with certain procedures notifying you of the transfer.

Closing an Account May Affect Credit Scores

Open mortgage accounts in good standing are generally good for credit scores. If your old mortgage loan is no longer showing open and active and the new account is not yet appearing, your credit scores may fluctuate again once the new account is added to your reports.

Occasionally, your mortgage payment may go up or down due to a property value reassessment. The frequency of property reappraisals can differ by location. It may happen once a year, every 2 years or only when a house changes owners.

Sell The Home And Pay Off The Remaining Mortgage

You can't just send in a check for the loan balance because you will owe interest up until the date of the move. When you get your payoff quote, it will have an expiration date. As long as you make your payment before that date, the amount quoted is what you owe.

' Many mortgage lenders routinely transfer loans to other companies who have the capability to better service the loan over its lifetime. Your mortgage isn't being singled out, but more likely is simply one among many in a very large transaction.

Can you transfer a mortgage to someone else? ›

The short answer is yes, you can transfer your mortgage to another person, but only under certain circ*mstances. To find out if your mortgage is transferable, assumable or assignable, contact your lender and ask.

Mortgage payments can change even when the homeowner pays on time. Changes in your escrow account, property taxes, homeowners insurance or interest rate can increase the dollar amount of your mortgage loan payment.

The part of your fixed-rate mortgage payment that changes annually is your escrow. Each year, the financial institution that holds your mortgage estimates how much you'll pay in property taxes and home insurance. If your home value has risen since the prior year, the cost of your taxes and insurance will also increase.

The lender has the legal right to sell the mortgage to another entity, lender or investor, under federal law and under the terms of your loan contract (read the fine print). In fact, it's a pretty common practice in the mortgage industry.

Many first-time homebuyers don't realize their loans will likely be sold to another mortgage loan servicing company after closing. In fact, a loan can be sold again and again (and again).

When the bank or lender that originated your mortgage sells it, they get back all the money they lent you right away, plus a chunk of the interest you're expected to pay over the life of your mortgage. They also get some of your closing costs.

Lenders sell mortgages so they have money to lend to other borrowers. Some sell loans to other financial institutions but keep the servicing rights. In this case, the customer deals with the same lender and sends the payments to the same place. It hardly affects consumers, since the point of contact doesn't change.

You'll Get Notice If Your Loan Servicer or Holder Changes

Don't be surprised if you find out that your mortgage loan has been sold or the servicer changed. A mortgage debt often changes hands over the life of the loan. If your mortgage is sold or the serving rights change, you'll get a notice about the transfer.

Mortgage lenders originate loans and then place them for sale on the secondary market. Investors who purchase those loans receive the right to collect the money owed. Just like any market for securities, the value of mortgages on the secondary market depends on their risk and potential return.

Under a holding mortgage agreement, the homeowner acts as a lender to the home buyer, offering them a loan to finance their purchase. The buyer makes monthly payments to the seller, who retains the property title until the loan has been paid in full.