Have you recently received notification that your mortgage was sold? Learning about a mortgage sale might be concerning for some people, because they don’t understand why it was sold. If your mortgage has been sold, you can rest assured that everything is fine with your home loan. In fact, there are certain situations where a sold mortgage can actually be to your benefit.
Frequency of Home Loan Sales
It is normal to wonder “Why did my mortgage get sold?” and you are not alone because the sale of a mortgages is becoming more common, and it is actually more common than most people realize. When your mortgage is sold, it creates market liquidity, which can lead to a lower mortgage rate for you.
How Mortgage Sales Work
In order to understand why your mortgage was sold, you first need to get a clearer understanding about the mortgage process. Previously, when a bank was issuing customer loans, the bank was only allowed to lend out the amount of money that was held in deposits. So, the bank could total up the savings and checking accounts, and then issue loans in the same amounts. If there was only $100 million in deposits, then that was the upper limit of the amount that they could loan out.
This rule limited the amount that banks could dispense in loans, especially in the situation where bank members withdrew money from their accounts. So, a mortgage secondary market was created. Part of the secondary market included the establishment of Fannie Mae and Freddie Mac, which is a program that buys home loans when they have met certain requirements.
If a bank has issued loans, and they need to replenish their cash reserves, then they can sell the mortgage to another entity. The entity takes over the loan, and pays cash to the bank, resulting in a situation where the bank can turn around and loan out the money again.
When your bank sells your mortgage, there are actually two types of sales that may have occurred: The note could have been sold, so that the buying company holds the financial responsibility for the loan. Or, there may be a sale of the servicing of the loan. It is not common for the loan servicing to be sold to another company, but it is possible.
You are Protected
If your mortgage is sold, you can have the peace of mind to know that you are protected. Once a loan has closed, the terms cannot change. So, even if the mortgage changes hands, you will still have the same terms that were agreed upon when you obtained the mortgage. Additionally, there is no concern about the way it will impact your credit, because a mortgage sale doesn’t affect your credit score.
Some people might wonder how a mortgage sale would impact veterans mortgage assistance, and the answer is that there is no impact. If you have a veterans home loan, your loan will maintain the same terms that are agreed upon when you received the loan.
Give us a Call and talk to one of our VA home loan specialists they can help answer any of the questions you have about your mortgage being sold.