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Getting a letter in the mail informing you that your mortgage has been sold may be jarring for many homeowners.
A number of questions may immediately spring to mind: What does this mean? Do my payments change? Did I do something wrong?
Hearing that your mortgage has been sold may churn up memories of the housing crisis back in 2008. And with interest rates rising and the real estate sector experiencing a bit of upheaval, homeowners may be rightfully concerned that they’ll somehow end up getting the short end of the stick, like so many did a decade and a half ago.
The vast majority of homeowners should be relieved to learn that having your mortgage sold doesn’t actually mean a whole lot. In fact, perhaps the most consequential change is that you’ll simply be sending your payment to a different servicing company. And, if you keep making your payments on time, it should be a smooth transition process.
“It’s very common for a mortgage to be sold,” says Keith Gumbinger, vice president at HSH Associates, an online home loans consumer resource. The only thing homeowners should do, Gumbinger adds, is to “make sure everything is in order with the new servicer.”
Why Did My Mortgage Loan Get Sold?
It’s more or less the industry standard that a loan originator – that is, the company that originally doled out a mortgage – would sell it to a new company. “A loan is originated, and a lender can keep it on their books or sell it to another party who consolidates it,” Gumbinger says.
Companies make money originating loans, and there’s further money to be made by servicing those loans. Some companies specialize in one or the other (many companies do both), and as a result, will focus their efforts on origination or servicing. The main purpose behind selling a mortgage to a servicer, though, is to ultimately securitize them–bundle them up with other mortgages and sell them to investors, who earn a return from mortgage and interest payments.
“Loans are passed around all the time because people are looking to tune their portfolios,” Gunbinger says. “[This process] has been around for decades – the originate-to-sell model has become the dominant model in the industry.”
As for what the actual process of having your mortgage sold looks like?