Why Was My Loan Sold
Most people dont realize that the secondary home loan market plays a huge role in keeping the mortgage industry thriving. This secondary market purchases mortgages and makes money as you pay off your home.
Home loans are sold regularly for two reasons. The main reason is to allow lenders to afford to lend money to new home buyers. Its 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, theyre able to take this debt from their balance sheet and free up their credit for new customers.
The second reason your home might be sold is to provide the lender with instant funds. Your lender might earn tens of thousands to hundreds of thousands of dollars off of your home loan in interest, but theyll need to wait 15 or 30 years or the length of your mortgage to receive their funds. Sometimes lenders prefer to make a faster profit by selling off your mortgage to an investor.
You can find out if your mortgage can be sold by consulting your loan paperwork. Your lending agreement or mortgage contract will detail in fine print whether your home loan has the option of being sold to another investor.
Will My Loan Change
The details of your loan your mortgage rate, terms and other agreements will not change if your home loan is sold by your current lender. Those details are locked into your contract and will remain the same as they did on the day you closed on your home.
What you need to look out for are potential changes in your loan servicer.
When lenders sell your home loan to institutions like Fannie Mae, Freddie Mac or the three main government agencies, they sometimes retain servicing rights. This means theyll still handle all the home loan servicing.
As a customer, this means youll still deal with the same lender you financed your home through. Your service wont be interrupted and you likely wont even notice any differences. Your lender will send you a letter if your home loan changes investors, with all of the specific information regarding this transaction, and will note that your servicing will remain the same.
Not all banks and lenders are able to keep home loan servicing after a loan has been transferred, however. If this is the case, your servicing will transfer to another lender. When your loan is sold, you’ll be notified of this change with a transfer notice within 30 days of the loan sale. When you receive this notice, your lender will let you know if your servicing was transferred and will provide details with your new contact information.
Why Do Banks Sell Their Mortgages
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Much about the home-buying process can be confusing. When you add mortgages to the mix, it can become even more challenging. From interest rates to closing costs, it can be tough to keep track of everything it takes to become a homeowner.
What We’ll Cover
Unfortunately, being prepared for everything is next to impossible, and sometimes life can throw you a curveball. As one of our users recently asked:
Bank of America sold my mortgage to Carrington. What does this mean?
In truth, it happens all the time banks frequently sell their mortgages to other financial institutions. Heres why they do it: to free up money for selling more mortgages. Fortunately, this common occurrence doesnt have to keep you up at night.
If you’re interested in demystifying the process of paying off your mortgage after it’s been sold, read on to learn more about why banks sell mortgages and what you can do when this happens. We’ll also let you know about banks that don’t sell their mortgages and how you can refinance if your bank sells yours.
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Who Do I Contact At The Bank To Buy Mortgage Notes
To buy a note from a bank, you need to establish contact with the person who handles the transactions, aka the decision-maker. Decision-maker titles vary from bank to bank, primarily driven by bank size and note asset type.
Smaller banks could have decision-makers all the way up to the president involved in certain non-performing note sales. A local bank is a small business and operates like one, with decision-makers, processes, meetings, and lots of staff involved.
Larger banks often have secondary marketing desks or workout officers who handle note sales, though senior management members sometimes make the deals.
You can find decision-maker contact information through various sources, including:
- Lenders website
- Data.com a continually updated, crowd-sourced database of hundreds of thousands of contacts
- LinkedIn if used properly, can help you identify and contact real decision-makers
- Professional organizations like TMA, ABI, and local banking groups
BankProspector takes the guesswork out of identifying the right person to contact. Our subscribers can easily access 63,692 bank contacts. Our full-time contact managers constantly monitor and update employee names and contact details so when you need the right number or email address, its there.
Build your contact list, prepare your script, and research lender details before reaching out to decision-makers.
How Do I Know Which Banks Are Selling Mortgage Notes
Identify note sellers by starting with local and regional lenders. Thousands of banks and credit unions sell notes throughout the U.S., but long-term note buying success usually involves doing business with lenders near you.
Finding banks with non-performing notes for sale requires research and efficient, effective communication.
Since there isnt a centralized list of banks selling notes, you may need to check a few sources for prospects. Top bank prospecting tools include:
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Mortgage Loan Sold To An Investor
As we mentioned, it’s possible for your mortgage lender to sell your loan to another company or investor whenever they choose. This includes during a loan modification process, whether you’ve just submitted the application to get the ball rolling, or you’ve been approved but the details haven’t yet been finalized.
When A Mortgage Company Sells Your Loan
Lenders and investors buy and sell mortgages all the time, usually without any problems. So how do you prevent mishaps if this occurs?
If you get a notice from a new servicer without notification from your current servicer, dont send any money. Contact your current servicer. Thats how you avoid fraud.
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What To Expect In A Transaction When Buying Notes From A Bank
There are lots of different ways that a transaction can come together, but the indicative bid process is most common. In this scenario, you are given some information about the asset, at which time you make an indicative bid.
An indicative bid is typically subject to a fast-moving due-diligence period. Frequently you will make your indicative bid in the form of a Letter of Intent . Sometimes you will put down a binder, also known as a good faith deposit or escrow.
When buying notes from the bank, you can expect:
- Attorneys to be very involved in the process.
- Your transaction to require approval by a committee.
- To await approval from multiple decision-makers. This aspect varies depending on the size of the bank that youre pursuing and the size of the deal. However, some bank note sales only go through one or two people.
Generally speaking, when you start a note purchase with a bank, you want to put your best foot forward. This isnt to say that you cant negotiate, but re-trades are generally frowned upon. If youve gone through your initial diligence and are coming to a close and you look for a re-trade, you can expect real pushback and the possibility that you wont do business with that lender again.
Transaction timeframes are typically sensitive when youre dealing with banks. This is partially due to their quarterly reporting cadence. Be prepared to move swiftly and communicate regularly during the purchase process.
What The Loan Sale Means For You
As a homeowner, it can be frustrating to find out that your mortgage has been sold. After all, you likely put lots of time and effort into finding the right lender, and discovering youve been passed off with little notice can be quite disappointing.
Fortunately, the loan transfer shouldnt impact your rates or terms included in the original agreement. The servicer may only change servicing-related details, such as where you send your payments, your payment date, and in certain situations, the way that escrow is calculated.
The new servicer may conduct an escrow account analysis to understand the balance within the account and determine a surplus, shortage, or deficiency. If the servicer determines any such balance, or if escrow terms or accounting formulas change, the servicer must provide you with your first escrow document within 60 days of the transfer. All other loan terms will remain the same.
Due to the change in payment addresses and possible due dates, youll have a 60-day grace period on any late payments or payments that went to the wrong servicer. You cant be charged any late fees or penalties during this time.
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Servicers Can Sell Your Mortgage
Lenders can enter agreements with servicers to purchase batches of loan servicing. Or lenders may shop around for a servicer if theyre carrying too many loans on their books.
Servicers are interested in buying loans in order to sell other products to their new-found customers. Andrews uses an example of a big bank that can then attempt to sell retirement funds, credit cards, or other profitable financial product to customers they had no prior relationship with.
Many lenders originate loans, and then proceed to sell off the servicing or the loan itself. If the servicer changes, the customer must receive a notification. There will be a grace period in case a borrower accidentally sends payment to the wrong place.
Lenders often sell the loans to financiers as a mortgage-backed security for investors or to government-sponsored entities like Fannie Mae, Freddie Mac, and Ginnie Mae.
Why Do Lenders Sell Loans
The mortgage industry sometimes refers to as a goodbye letter. In essence, its an advance notice that a homeowners mortgage has been sold and transferred to another entity. For many, this might be somewhat surprising. A borrower and a loan officer form a relationship during the homebuying process or when refinancing an existing mortgage but not too soon thereafter the relationship might seem somewhat diminished. Wheres the loyalty? Why did my mortgage company sell my loan when I was happy where it was? The answer is that without the ability to sell a loan, getting a new mortgage would be made much more difficult.
Gone are the days when a mortgage company or a bank would pull money out of its vault in order to finance the purchase of a new home. Instead, lenders operate from a line of credit. When a new mortgage is approved and ready to fund, lenders tap into that line of credit. After the loan has funded, it can then sell the loan to a third party. Selling the loan replenishes the line of credit so the lender can continue making more home loans. But who does the lender sell to?
A mortgage servicer is typically a division within a mortgage company or bank that gets paid a fee for handling the monthly payments on a loan. Each month, when a borrower writes a check to the mortgage company, the funds first go to the servicer and later transferred to Fannie or Freddie.
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What Rights Do I Have
The most important thing to take note of is that your lender must provide you with a loan ownership transfer notice when your mortgage is sold.
The new owner of your loan must notify you within 30 days of the effective date of transfer.
Included in this notice should be the following information:
- The new owners name
- Address and telephone number of new owner
- The person who can resolve issues concerning your loan payments or any right to rescind the loan
- Date of transfer
- Whether the transfer of ownership is recorded in public records.
Why Would A Bank Sell A Non
Banks sell non-performing loans to other investors in order to rid themselves of risky assets and clean up their balance sheets. Sales of non-performing loans must be carefully considered since they may contain numerous financial implications, including affecting the companys profit and loss, as well as tax situations.
Other reasons to sell include the much higher liability associated with foreclosure versus being the lender or note holder. Banks can also avoid having to pay back taxes, and they can expedite the recapture of capital for reinvestment. Thats because selling a note results in an immediate cash return versus foreclosing and marketing the house for sale as an REO asset.
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What To Expect If Your Servicing Transfers
Finding out you have a new loan servicer after your mortgage has been sold is completely normal many lenders sell mortgages.
The transfer notice will provide the information you need to get a hold of your new lender. From there, you may need to set up a new online account, direct deposit schedule and account profile on a new online servicing system. Be sure to act on this quickly so there are no delays that could cause your home loan payments to go through past the due date.
If there are delays that cause your mortgage payment to be missed, dont panic. Reach out to both providers to explain the issue. For instance, if you were notified on the 29th of a change in service and your next mortgage payment was already scheduled to go through on the 30th with the old provider, you might not be able to set up a new payment in just 24 hours.
Be sure to talk to your original lender to ensure your last payment went through and that you have clear expectations of when you should stop paying them. Then reach out to the new lender with this information, particularly if you missed a payment because you scheduled it with the old provider. If you accidentally make a payment to your old servicer within 60 days of the transfer of servicing, they arent legally allowed to consider it a late payment.
Communication is key during this process, so make sure youre covered and communicating with both providers.
Three Steps To Start Buying Bank Direct Mortgage Notes
We cover these steps and their components in-depth in our free training webinar and our BankProspector software provides the prospect information including the list of banks and credit unions as well as decision-makers and their contact info.
Some of the banks you call today will have notes that they are looking to sell. The vast majority of them wont have something on their desk today but they might next week, next month, next quarter, or even next year. Unless youre a very short-term buyer, you can see how it makes sense to have a system of communication that keeps you in touch.
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You Have Options When Your Bank Sells Your Mortgage
It can be stressful when you receive a notice that your mortgage has been sold to another financial institution. Although nothing should change in terms of your mortgage payments, you may prefer not to do business with the institution that now holds your mortgage.
To avoid this dilemma, consider doing business with banks that dont sell their mortgages or refinance your mortgage with an institution that offers better terms.
With interest rates at a historic low, now is a great time to refinance your mortgage. Click the button below for your free refinance quote and start turning your dreams of mortgage-free homeownership into a reality.
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Do The Terms Of Your Mortgage Change
The short answer is: no. The new servicer of your loan is legally not allowed to change the terms of your previous loan.
This means that things like your interest rate, life of your loan, and payment date must remain the same, even under the new lender.
In regards to the escrow in your home, the new servicer will reevaluate your loan to determine if a sufficient amount of money is being collected each month.
If your escrow, as well as your monthly payments towards property taxes, mortgage insurance, and/or hazard insurance are deemed insufficient, it’s possible the new servicer of your loan could increase your monthly payment.
It’s also important to note that your new mortgage servicer cannot force you to establish an escrow account, if it was previously stated that you were contractually able to pay taxes and insurance on your own under your former loan.
However, if this stipulation was not specifically stated in your previous mortgage contract, or was just never discussed between you and your previous lender,then it’s very possible that your new servicer can require you to establish an escrow account with them.
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