Updated July 10, 2019. Anyone who’s ever owned a home has more than likely experienced their mortgage being sold by the lender to another financial institution.
My mortgage has been sold twice in the two years I’ve owned my home. This got me wondering about my rights as the homeowner and whether I needed to be aware of potential changes in loan terms or servicing details.
Here’s what industry experts had to say about these questions and their tips for staying ahead of the curve when your mortgage is sold.
Why mortgages are sold
There are many reasons why lenders sell loans, said John Cabell, director of wealth and lending intelligence for J.D. Power.
Often the lender has made a business decision not to service loans, as doing so requires different corporate resources and skills to manage, Cabell said.
“Lenders may also sell loans to optimize their business model, or make money off the sale of the loan,” said Cabell. “They may also be reducing liabilities so that they can originate more loans for new customers.”
What are your rights?
Both the buyer and seller of the mortgage must provide you with written notice at least 15 days before the mortgage transfer takes place, according to federal regulations.
In addition, the new mortgage owner is required to provide you with its contact information within 30 days after the transfer. You’re also entitled to a 60-day grace period in case you send a payment to the old lender.
Beyond that, the lender has every right to sell your loan and you can’t do anything stop it, said Tammi Lindley, senior loan officer for the Tammi Lindley Team, a mortgage lender.
“If as a result of the sale you find yourself with a lender you don’t like, your only recourse is to pay the loan off, most likely with a refinance,” said Lindley. (Learn how to refinance your mortgage.)
Know the difference between a loan owner & servicer
There’s a difference between the owner of the mortgage and the mortgage servicer. They don’t necessarily have to be the same company, said Matt Hackett, operations manager for Equity Now, a direct mortgage lender.
The owner is the financial institution that loaned you the money. The servicer is the company that issues the monthly mortgage statements and handles day-to-day loan management.
“A consumer has a right to know when their mortgage is sold and when their servicing is sold, and they get a new servicer,” said Hackett.
Does anything change when a mortgage is sold?
There’s a difference between mortgage terms and payment features. The terms of the mortgage loan are dictated by a note signed at closing and cannot be changed just because a loan is sold.
Mortgage terms include such things as interest rate, origination fees, amount borrowed and length of loan. These items should remain constant when the loan is transferred, said Cabell. However, payment features may change.
“Servicers may have different billing fees, payment features and flexible payment options,” said Cabell.
Some companies may offer web payment options, for example, while others will not, said Hackett. Some may offer auto-pay or payment by phone. It can be helpful to call and ask about these details.
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Image: Breno Assis