You've just moved into your new home. You've unpacked, and you're starting to settle in when you receive a letter informing you that your mortgage has been sold and is being serviced by a new institution. Is this allowed? Have the terms of your mortgage changed? Why would your lender sell your mortgage?
Among the many documents, you signed when you first applied for a loan was a Mortgage Servicing Disclosure. This document tells you what percentage of the lender’s loans are sold. More often than not, the majority of loans approved and funded by a particular mortgage company will be sold to someone else. It's important to note that just because your mortgage has been sold, this does not change the terms of your loan. Your loan payment and interest rate will not, and cannot, be impacted.
You’re probably wondering, “Why to go through all the effort of originating, approving, and funding a loan just to forgo all the interest that new loan provides?” The answer is surprisingly simple. If not for selling the loan, the lender would soon run out of money to lend.
Mortgage companies today work with a line of credit. It’s not as if the mortgage company approves a loan then opens up a vault full of money to fund your mortgage. When it’s time to fund your loan, the lender taps into the line of credit for the necessary amount. In order to replenish this line of credit, the lender sells the loan to a third party. Once the loan is sold, the lender now has more funds to make more loans. Who is the loan sold to? Many times it’s sold to other mortgage companies, but ultimately the loan is sold either to Fannie Mae or Freddie Mac.
The marketplace for all this loan buying and selling is called the secondary market for mortgages. This secondary market is robust and active and keeps the mortgage market liquid. Without a secondary market, there would be fewer loans issued and still fewer choices. When your loan is sold it’s not because your original lender doesn’t appreciate your business, it’s so they can continue to service other home buyers and make more loans.
Author:Keith Judish Phone: 623-224-7956 Dated: May 10th 2019 Views: 227 About Keith: O'Keith Judish licensed REALTOR® with Realty ONE Group serving the West Valley and Phoenix Metrople...
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This formula is only a guide and not to be construed as actual lending
"I was a first time home buyer moving cross country with unique accommodation requirements due to using a wheelchair as my primary means of mobility. Keith made the process easy through the use of technology, skill and a human touch. The virtual tours on his YouTube channel provided an accurate depiction of the properties which made it easy to make an offer. Keith also had a variety of equally excellent contacts to help in the closing process. After the sale he has still been just as easy to reach as I settle into a new area and home. The person you see on his online profiles, videos, website and blog posts is exactly who represented me in this successful buying process."