Why do mortgages get sold?
Quick insights
- Your lender might sell your mortgage to free up capital for their business or manage risk, often so they can fund new loans and help more people buy homes.
- Even if your loan switches hands, key terms (your interest rate and monthly payment) typically won’t change.
- A mortgage sale might feel surprising, but for most borrowers, managing your loan shouldn’t change much; you’ll just work with a new company to handle your payments.
Purchasing a home comes with plenty of moving parts, and one of them might be learning that your mortgage has been sold to another company. The concept may feel unexpected, but it’s a normal part of how the mortgage system works. Understanding why it happens and what it means for you can help make the process feel clearer and easier to navigate.
The main reason why mortgages get sold
Most banks and mortgage companies prefer to keep cash moving, so they can continue lending to other homebuyers. Selling mortgages helps them manage financial risk, free up capital and keep the business running smoothly. When you take out a 15-year mortgage or 30-year mortgage, that’s a long time for a lender to wait around for their money. By selling a mortgage, they might earn immediate revenue that can be reinvested into other financial products or services.
It might sound surprising, but lenders that specialize in originating mortgages may sell home loans soon after you close. If your mortgage gets sold once (or even several times), there’s no need to panic. Mortgages are often bundled together with thousands of other loans and sold to investors in what’s called the secondary mortgage market. It’s how mortgage providers keep the cycle of home loans going.
What happens if your mortgage gets sold?
When you get a notice saying your mortgage has been sold, it’s mostly a behind-the-scenes change. Your loan terms stay the same; the new owner of your mortgage (an investor or new lender) must honor the original terms of your mortgage loan. The main difference is that you will send payments to a different loan company.
Sometimes, the company that services your loan might also change. That means you will have a new point of contact for questions or payment assistance. Just make sure to double-check the transfer details, update your payment information and keep paying on time. Selling loans is part of how mortgage lenders keep money flowing while you keep building equity in your home.
What to do if your mortgage gets sold
While the core terms of your mortgage won’t change, a few key steps can ensure a smooth transition if your mortgage gets sold.
1. Read all notices: You should receive a “Goodbye Letter” from your current servicer and a “Welcome Letter” from your new servicer. These are legally required.
2. Pay attention to:
- The effective date of the transfer.
- The name and contact information of the new servicer.
- The new address for sending payments.
- Instructions on how to set up online access or automatic payments with the new servicer.
- Any grace period for payments during the transition.
3. Verify the new servicer: If you’re at all unsure or if something feels off, you can contact your original lender/servicer directly using a trusted phone number (from their official website or a past statement, not from the new letter if you’re suspicious) to confirm the sale and the details of the new servicer. This helps guard against potential scams.
4. Update your payments:
- If you have automatic payments (ACH, bill pay) set up through your bank or directly with your old servicer, you must update them to reflect the new servicer’s information and payment address.
- Do not assume payments will automatically transfer.
- Make sure to cancel any recurring payments with the old servicer after the effective transfer date to avoid duplicate payments.
5. Keep records: Save copies of the notices you receive and records of all your mortgage payments, especially during the transition period.
6. Check your escrow account (if applicable):
- If you have an escrow account for property taxes and homeowner’s insurance, the funds should be transferred to the new servicer.
- The new servicer should provide you with an updated escrow analysis. Review it to ensure your taxes and insurance are being paid correctly and that your monthly escrow portion is accurate.
7. Monitor your credit report: Keep an eye on your credit report for a few months after the transfer. This is to ensure that payments are being reported correctly by the new servicer and that there are no errors related to the transfer.
8. Understand the grace period: Federal law typically provides a 60-day grace period after a mortgage servicing transfer. During this time, you cannot be charged a late fee if you accidentally send your payment to the old servicer.
The goal is to ensure your payments continue without interruption and that you know exactly who to contact for any mortgage-related questions. It’s mostly an administrative task, but an important one!
How to find out who owns your mortgage
Knowing who holds or services your loan can help you stay organized and ensure your payments go to the right place. If you’ve received notice that your mortgage was sold, there are a few simple ways to find out.
Check your mortgage statement
- Your monthly mortgage statement usually lists the name and contact information of the current owner or servicer of your loan.
- If your mortgage has recently been sold, that information should be updated in your next statement.
Contact the servicer
- You can reach out directly to your loan servicer to ask who currently owns your mortgage.
- They’re generally required to provide accurate and up-to-date information about your loan and the company managing it.
Use government resources
- You can use online lookup tools from government-sponsored enterprises like Fannie Mae or Freddie Mac to see if they own your mortgage.
- These tools typically ask for basic details, such as your home address and the last four digits of your Social Security number, to confirm ownership.
In summary
Your mortgage being sold might sound unsettling, but it’s part of how the lending world operates. Mortgage lenders may sell loans to manage risk and keep money circulating for new homebuyers. The good news is that your loan terms stay the same.
With a little organization, like verifying transfer details and updating your payment information, you can keep things running smoothly. Staying informed helps you stay in control of your mortgage, no matter who owns it behind the scenes.
