You just survived the mortgage jungle and are celebrating in your new home. It took you five minutes and ten exclamation points to send out your new home address to all of your friends and family.
Now… you are sitting on your brand new couch, waiting for all of your housewarming presents, but the first delivery in the mail isn’t a blender or a photo of your weird aunt and her cats. Nope, it’s a letter regarding your mortgage.
The letter is from someone named Fannie Mae, and reads “Notification of Assignment, Sale, or Transfer of Your Mortgage Loan”.
Your first thought: “What the $%@? Who is Fannie Mae?” Your second thought: “What does this mean for my mortgage and my new home?”
My loan was sold?
Even though you spent time and care preparing your mortgage application for a specific lender (and if you didn’t use MortgageHippo.com, it was most likely a painful process), there’s a very high likelihood that your mortgage was sold to another company after closing on your home. Welcome to the vibrant, fast moving economy.
However, this should neither surprise nor concern you for two reasons:
1. The mortgage provider was required under federal law to disclose to you during the mortgage application process as to whether or not your mortgage may be sold.
2. Selling mortgages is a very common practice and allows for more cash in the marketplace, so that lenders can make loans to more homebuyers.
Who’s Buying My Loan?
Among other buyers, you may find your loan being sold to Fannie Mae or Freddie Mac. From January 1, 2009 through December 31, 2013, Fannie Mae provided approximately $4.1 trillion in liquidity, which enabled 3.7 million home purchases and 12.3 million mortgage refinancings.
As you can tell, Fannie Mae purchases a lot of loans.
Fannie and Freddie are government-sponsored enterprises (GSEs) that are part of a secondary market in home mortgages, purchasing mortgages from the lenders who originate them.
They hold some of these mortgages, and some are securitized: sold in the form of securities and packaged.
If you are a student of recent history, you know that packaging subprime (aka high risk) mortgages into securities was part of the problem that caused our recession. The government has since passed various legislation and created the Consumer Finance Protection Bureau to help prevent abuse and avoid another recession.
Wait.. seriously… my loan was sold. What are my rights?
There are two components of your loan that may be owned:
The Mortgage Note
The Servicing Rights
The owners of the note and servicing rights do not have to be the same company. That’s right, the holder of your note may not be the person that you are paying monthly for your mortgage. Oy Vey!
Do not fret — government regulations require that you as the borrower receive notice whenever there is a transfer of either component.
The Truth in Lending Act was amended in 2009 to require that borrowers be notified when their mortgage has been sold, transferred, or assigned to a new creditor.
The notice must be provided within 30 days of the sale, transfer, or assignment, and must include information about the new creditor, the date of transfer, how to reach a party having authority to act on behalf of the new creditor, and recordation of the debt.
Furthermore, the Real Estate Settlement Procedures Act (RESPA) provides protection for you if your loan was sold.
Under RESPA, your present loan servicer is required to notify you in writing of the assignment, sale, or transfer of servicing rights at least 15 days before the effective date of the transfer. The new servicer or holder of your loan must also send you this notice no later than 15 days after the effective date. The note of transfer must include the following information:
The effective date of the transfer, the date your current servicer will stop accepting payments and the date the new servicer will begin accepting them.
The name, address, and toll-free or collect call telephone number for the new servicer.
Information that tells whether you can continue any optional insurance, such as mortgage life or disability insurance, and what action, if any, you must take to maintain coverage.
A statement that the transfer of servicing does not affect any term or condition of your mortgage documents other than the terms directly related to the servicing of the loan.
The last bullet point is important to remember: the transfer of servicing does not affect any term or condition of your mortgage documents other than the terms directly related to the servicing of the loan.
In other words, make sure the new owner or servicer of your loan is not attempting to change anything about your loan other than your payment procedures and other servicing elements.
Other items to keep in mind:
During the 60-day period beginning on the effective date of the transfer, the payment may not be treated as late if you mistakenly send it to the old mortgage servicer instead of the new one.
If you have questions or problems with the servicing of your loan, the servicer is required to respond to you. Write to your servicer and call it a “qualified written request under Section 6 of RESPA.” It should be a separate letter and not mailed with your payment. The mortgage servicer must respond to you within 60 business days of receipt.
But I just received a letter from another company that the servicing of my loan has been transferred.
As mentioned earlier, your loan can be held by one company and serviced by another. Some holders of loans are not experts in the servicing and collection of their payments. Therefore, they transfer the servicing rights for a fee to another company.
For example, your loan may be owned by Fannie Mae, but serviced by Wells Fargo. In this example, your payments and questions will all be directed to Wells Fargo, but the company that ultimately holds your mortgage loan is Fannie Mae.
Can my mortgage be sold again?
Yes, your mortgage can be sold again and may be sold multiple times during the life of the loan. Long gone are the days where you walk to your local bank for your mortgage and they own and service your mortgage for the life of the loan. While your mortgage will most likely be sold in today’s market, it is this fast moving economy that allows for mortgages to be issued in both up and down economies.