You comparison shopped, choosing your mortgage lender carefully. Then, shortly after closing, you receive a letter from a new company introducing themselves as your servicing provider. What does this change really mean?
Having your loan suddenly sold to a new lender may feel unsettling, particularly to first-time homebuyers. Did you do something wrong? Is your lender allowed to do this? Will your carefully budgeted payment amount suddenly change? Here is what you need to know about your mortgage being sold to another company.
Why Are Mortgages Sold?
From the perspective of a borrower, the ‘sale’ of your mortgage usually means that the servicing of your mortgage has transferred to a new company, meaning you will be sending your monthly payment to a new company. This can happen a couple different ways, depending on who you chose to work with on your mortgage. Mortgage originators are entities that work with borrowers to set up and conduct the mortgage transaction. Mortgage servicers handle the administrative duties of the mortgage such as collecting monthly payments or managing escrow accounts.
Many mortgage originators do not service loans and as a result sell your loan shortly after it funds to a mortgage servicer. However, some companies, such as PennyMac, both originate AND service mortgages so your loan remains with your originator after it funds and you retain the relationship with your lender (often for the life of your loan).
It is also not uncommon for you mortgage to be ‘transferred’ from one mortgage servicer to another. Mortgage servicers earn fees for servicing your account and from time to time mortgage servicers may decide to sell the rights to service your mortgage to another company.
Your consent is not required for the sale of your mortgage and your loan may be sold multiple times. However, it is required that all lenders disclose whether your loan will be sold, as well as the percentage of loans that they typically sell.
This might sound scary but it shouldn’t. The terms of your loan will remain the same. Your payment amounts can change if you have an Adjustable Rate Mortgage (ARM) or other type of adjustable loan. If you do not have an adjustable loan, your payments will only change if factors outside the scope of your loan (e.g. mortgage insurance or property taxes) also change. These types of changes, however, can take place regardless of whether or not your loan is sold to another company.
Who Actually Owns My Mortgage?
Where this process can get confusing is that neither the company that originated your loan, nor the servicer, may actually own your loan. Today, the majority of home loans are guaranteed or issued by Fannie Mae, Freddie Mac or the FHA, government-chartered companies that purchase loans from lenders to free up money so they can then lend to other mortgage borrowers.
What Are My Rights and Responsibilities?
As a mortgagor, you do have certain rights. Similarly, the lender, or mortgagee, has legal and fiduciary responsibilities to ensure you are treated fairly. Some of those rights are as follows:
- Your current lender must provide you with a loan ownership transfer notice when your mortgage is sold.
- The new mortgage servicer must notify you within 30 days with their name, address, telephone number, date of transfer and whether the transfer of ownership will be a public record.
- During the transfer of your loan, there is a 60 day grace period where you won’t be charged a late fee for accidentally sending a payment to your previous mortgage lender.
It is your responsibility to read the statement from your new mortgage servicer very carefully to make sure that all of the information is accurate. You should contact the new mortgage servicer immediately if you spot any issues or errors.
Overall, the sale of your loan should not cause you any problems, but there are three common issues to watch out for:
- Confusion: In order to avoid late payments, make sure that you carefully read all correspondence from you new servicer and take note of when you will need to begin making your payments to them. Contact them if you have questions about who, when and how to make your payments.
- Different Features: When your lender changes, there is the potential for the loss of features like online account access or paperless statements that every provider may not offer.
- Bad Timing: You may not know if and when your loan will be sold. If you are in the process of a loan modification or refinance when your loan is sold, you should not have to start the process all over again with your new mortgage servicer. However, you should keep accurate records of what you have sent and received to ensure there are no issues with your loan modification that result from the transfer to your new servicer.
It Pays to Pay Attention to Your Mortgage
Although it can sometimes be confusing to homeowners, the freedom to sell loans allows lenders and servicers to remain stable and profitable—freeing up more funds for home buyers like you. If your loan is sold, be proactive with questions and organized with your new payment information. Paying attention to this quick and easy process will lead to a stress-free transition for you and your new mortgage servicer.
Also remember that PennyMac is one of the top loan servicers in the country, with more than one million happy customers. When you originate your loan with PennyMac, our commitment to your loan is extended to its servicing, so you don’t have to worry about your loan being sold to a company with subpar service.