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Much about the process of buying a home can be confusing. When you add mortgages to the mix, things can get even more challenging. From interest rates to closing costs, it can be difficult to keep track of everything it takes to become a homeowner.
Unfortunately, it’s nearly impossible to be prepared for anything, and sometimes life can give you a curveball. As one of our users recently asked:
Bank of America sold my mortgage to Carrington. What does this mean?
In reality, it happens all the time – banks often sell their mortgages to other financial institutions. Here’s why they do it: to free up money to sell more mortgages. Fortunately, this common phenomenon doesn’t have to keep you up at night.
If you’re interested in demystifying the process of paying off your mortgage after it’s sold, read on to learn more about why banks sell mortgages and what to do if this happens. We will also inform you about banks not selling their mortgages and how to refinance if your bank is selling yours.
Why Did My Bank Sell My Mortgage?
Although you may not realize it, banks sell their mortgages all the time. Consider this from the lender’s point of view. Banks lend money to borrowers and then wait for repayment over the course of 15 or 30 years.
However, that’s not how they typically make a profit – instead, banks charge interest at a rate agreed upon when the mortgage is provided. The profit banks make from interest payments can be astronomical.
For example, a homebuyer who takes out a $200,000 30-year mortgage with a 4% interest rate can expect to pay more than $135,000 in interest to the bank over that 30-year period.
Sometimes, though, it’s less attractive for banks to wait 30 years to earn $135,000 when they can sell the mortgage to Fannie Mae, Freddie Mac, or another financial institution for a commission.
If your mortgage is sold, you continue to pay off, but you do that to another lender. However, the terms of your payment will not change.
In addition, banks sometimes sell mortgages to other institutions to free up credit so that they can provide mortgages to other buyers. Since banks make money from the costs associated with providing mortgages, it is ideal for them to initiate as many mortgages as possible.
That said, it’s important to note that your consent is not required if your bank decides to sell your mortgage. However, there is one way to find out if your bank or financial institution will sell your loan.
When you apply for a mortgage, your bank must meet the conditions of the Real Estate Settlement Act (RESPA) and provide you with a Servicing Disclosure Statement.
On this statement you can read whether your bank:
Ultimately, it is important to know that banks sell mortgages for reasons that have absolutely nothing to do with you, the customer. They just want to free up capital to attract new borrowers.
What Should I Do If My Bank Sold My Mortgage?
First, don’t panic! As explained above, banks sell mortgages for their own reasons, usually because they want to make money or increase their available credit.
If your bank has sold your mortgage, it will not affect you, your creditworthiness or your financial viability.
If your bank sells your mortgage, the good news is that it will probably stay the same for you, unless you want to transfer your mortgage (see below). You can continue to pay off your mortgage, although you are now making payments to the institution your bank sold your mortgage to.
Your monthly payment amounts will not change, even if your new lender uses different mortgage interest rates or rates. You can still make the same monthly payments and pay the same interest that you agreed to when you signed your original mortgage agreement.
The only time you may need to take action is if your former and new lenders fail to notify you of the change in a timely manner.
Within 30 days of the official change of ownership, your new lender must contact you to provide their contact information, and your former lender must send you a notice of transfer of ownership of the loan.
If either lender fails to warn you in a timely manner, causing you to pay late, you can take action. File complaints with your former or new lenders and contact the Consumer Financial Protection Bureau to complete a mortgage complaint form.
Fortunately, there is a 60-day grace period for payments after your mortgage is sold. During this time, you cannot be charged late fees for accidentally sending your mortgage payment to your previous rather than new lender. Late payments made during this period also cannot be reported to credit bureaus.
While switching from an old lender to a new one should be relatively easy, it’s important to be aware of any changes to your mortgage. Once your mortgage has been sold, it is important to ensure that your payments are made on time and to the correct institution.
List Of Banks That Don’t Sell Their Mortgages
Worried about selling your mortgages? Fortunately, there are banks that don’t sell their mortgages, many of which are referred to as “wallet lenders.”
Many of them are small, community-oriented banks and credit unions, which are also likely to offer lower rates, less fees, and better customer service. Some of them include:
The list of banks that do not sell their mortgages varies greatly by geographic area. If you’re interested in partnering with a mortgage lender that won’t sell your mortgage to Fannie Mae, Freddie Mac, Carrington Mortgage Services, or another financial institution, check out the credit unions near you.
They are more likely to pay off your mortgage internally rather than sell it to another organization. Unlike banks, credit unions are non-profit organizations that focus on providing better products and services to their members.
Credit unions also charge lower processing and closing costs, another plus if you want to save on monthly mortgage payments.
Should I Refinance My Mortgage?
If you’d rather not do business with the institution your first mortgage was sold to, or if you’re worried it will apply predatory lending tactics to you, you have an option: refinance with another bank or lender.
Refinancing is a process that allows you to renegotiate the terms of your mortgage. This may include changing your monthly payments, increasing or decreasing the term of your mortgage (for example, switching from a 15-year to 30-year mortgage), switching from a variable-rate loan to a fixed-rate loan, or even abolishing your mortgage insurance.
All of this can save you money in the short or long term.
To identify the right move for you, you need to determine your priorities. For example, do you have priority to pay off your mortgage as quickly as possible? Then transferring to a mortgage with a term of 15 years may be something for you.
Once you identify your top reason for refinancing, you can start looking for the best rates, request a refinance from your favorite lenders, lock in a lender, and close the deal.
While the decision to refinance is a personal one, there are some factors to consider. Homeowners with adjustable-rate mortgages and high interest rates are often encouraged to refinance.
In addition, many financial experts recommend moving from a 30-year to a 15-year mortgage. If you can comfortably afford the higher repayments, you can pay off your mortgage faster.
Transferring your mortgage is made easy with tools like BestRates. Clicking the button below will take you to a form asking for your zip code. Then select the refinance option. BestRates will then present you with a list of the best options in your area to refinance your mortgage.
You Have Options When Your Bank Sells Your Mortgage
It can be stressful when you receive a message that your mortgage has been sold to another financial institution. Although nothing may change in your mortgage payments, you may prefer not to do business with the institution that now has your mortgage.
To avoid this dilemma, consider doing business with banks that don’t sell their mortgages or transferring your mortgage with an institution that offers better terms.
With interest rates at historic lows, now is a good time to refinance your mortgage. Click the button below for your free refinancing quote and start making your dreams of mortgage-free home ownership a reality.
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