Find out what you should do when your mortgage is sold
Are you preparing to buy your home? It is a good investment that comes with a lot of work. It involves comparing mortgage rates, saving enough to cater for closing costs as you determine how much money you need for the entire process. You have to research different mortgage companies and choose the best one that comes with favourable terms. The company should also have a strong financial background and offer low-interest rates.
After going through all these processes, you may realize that the name of the lender is not the same as the company you selected. Though this can be scary and disappointing due to the research you had to go through, selling mortgages happens all the time. Not many borrowers know this fact that is why you should understand the parts of a mortgage.
During the application process, mortgages involve three aspects. There is the loan originator, the servicing company and the lending company. When you apply for the loan, you deal with the loan originator directly. This is the person in charge of handling the paperwork on guiding you on the application process.
Once they have played their role, they send your application forms to the lending company. The company processes the application and approves your loan if you meet their requirements. The lending company can act as the loan servicing company, or they can sell it to a different company. As you make monthly payments for the mortgage, you will be required to address your check in the name of the servicing company.
The three different parties involved in the mortgage are all paid differently. For instance, the loan originator gets a commission for every mortgage they place. The lending and servicing company, however, get back their money over a long time.
Lending companies do not service the individual loans they fund to avoid getting broke. Instead, they bundle the loans together and sell them to government agencies which act as investors. The lending company, therefore, receives more money to lend another buyer from selling off the loan. It is a legal process that does not need your consent.
They should, however, inform you that another company will service your mortgage. Both loan owners send notifications to their customers within two weeks before the transfer is complete. This notification is essential for you to know where you should send the payment. If you send the payment to the old lender, it does not get lost since there is a set grace period for two months for the correction to be made.
The details of your mortgage do not change since the only thing that changes in the company’s name to whom you should address your check. Most people who receive the notice choose refinancing mortgages with a different company. You can either opt to work with another company or go along with the new arrangement. You can, however, prevent your mortgage from being sold by search credit unions or local banks.