Why loans are sold

If you receive this kind of notice, not to worry. Banks make money off your mortgage loan by collecting interest payments. Hopefully you did research before you purchased your home to figure out which mortgage was best for your financial situation. That might seem like good money. That provides instant cash. Mortgage sales are a common occurrence; if lenders are simply selling the loan and retaining the servicing rights, you should see no difference in your day-to-day interactions with your mortgage.

This includes giving you timely information about your mortgage and correctly crediting your loan payments. Some states, such as California, require a license in order to service mortgages.

You can verify these licenses on state databases in order to ensure that they are legitimate. If your lender is not also your mortgage servicer, it will choose the third party that will be handling servicing rights. However, if you have a complaint against your loan servicer, you can contact it in an effort to have the problem resolved.

If all else fails, you can opt to refinance your loan in order to acquire a new mortgage servicer. Lenders selling loans is a common occurrence. This is done for a variety of reasons, including seeking the ability to offer new loans.

Loan servicers are the entities that collect your mortgage payments and manage your escrow accounts, among other duties. You can contact your servicer in order to find out who owns your mortgage.

You can also check online to see if your mortgage is owned by Fannie Mae or Freddie Mac. The secondary market is very active. Lenders will buy and sell mortgages for a variety of reasons, including the need to free up credit or to raise funds. Rocket Mortgage. Congressional Research Service.

Consumer Financial Protection Bureau. Is My Loan Safe? Freddie Mac. California Department of Real Estate. Actively scan device characteristics for identification. This should not affect you financially. The originator is the person who helped you apply for the loan.

The lender also known as the owner is a company that approves, funds and owns the loan. The servicer is the company that manages the loan. Related: Can you pay your mortgage with a credit card? It will manage communications with the borrower. It will pay taxes and insurance from escrows. She notes that, in some cases, the servicer is the lender. Or it may hire a separate company hired to manage the loan. Keith Baker , Mortgage Banking Program coordinator and faculty at North Lake College, says around seven of 10 mortgage loans change hands.

He adds that, when a mortgage loan closes and funds, the lender has four choices:. Related: How much do mortgage lenders make on your loan? An asset-liability mismatch occurs when, for example, the lender owns a lot of long-term debt year mortgages , but retains short-term deposits 5-year CDs, for instance. It may sell some year loans and buy 5-year loans to balance itself.

Zorrilla says being on top of communication with your lender is key. Additionally, if you were in the middle of refinancing a mortgage and there was a payment made in the process, Zorrilla encourages consumers to call and verify that the payment went to the right place. You may need to check with both your old and new lender to find that out and to determine whether you need to redo any paperwork. Emily Starbuck Crone is a staff writer covering personal finance for NerdWallet. Image via iStock.

Why loans are sold. What happens next. How to protect yourself. The takeaway.