As a general rule, most lenders allow themselves an out on your final documents giving them the option to sell your loan to a different lender or service department at a later date. The good news for you is that whether or not the lender sells your loan, the terms of the loan are based on your note and will not change.Most loan documents have a servicing disclosure notice which states the typical percentage of the loans that they sell after the loan closes. However, when the loan is sold, the original terms of the loan stays the same and does not change.
There is a difference between a lender selling the mortgage and selling the servicing right. Loan servicing refers to billing the homeowner, applying payments, and maintaining the escrow account for property tax and homeowner insurance.
A bank can sell a loan to investors in the secondary market and retain the loan servicing right. In which case payments are still made to the bank, and the homeowner probably never realize that the mortgage has been sold. A bank can also sell the loan servicing right. In this case monthly payments are usually paid to the new bank that now services the home loan. Some loans are bought and sold several times throughout the loan term.
When a loan is sold to a mortgage investor, the originating bank or investor has the ability to invest in other or new loans. The purchased loan then becomes part of the secondary market. A few examples of the investors that buy and guarantee mortgages are Fannie Mae, Freddie Mac and Ginnie Mae.
Many loan officers that work for banks will try to sell you on the fact that they won't "sell your loan". While this may be true it isn't always in your best interest. Lenders and brokers that sell your loans to the end investor may be able to give you better interest rates and lower closing costs. Be sure to call us about the best option for your situation.
