From a borrower's perspective, the “sale” of your mortgage usually means that your mortgage service has been transferred to a new company, meaning that you will send your monthly payment to a new company. This can happen in two different ways, depending on who you decide to work with on your mortgage. Mortgage loans are sold regularly for two reasons. The main reason is to allow lenders to afford to lend money to new homebuyers.
It's a common practice to sell mortgages so that lenders can get more money to help finance additional mortgages. The process is cyclical and continues from there. All of these agencies can buy mortgage loans from lenders that meet each agency's guidelines and resell them in the secondary market to private investors. When either of these two entities buys mortgages, they sell them to private investors as mortgage-backed securities.
It's completely normal to learn that you have a new loan servicer after your mortgage has been sold; many lenders sell mortgages. Selling mortgages frees up money, allowing lenders to continue offering mortgages to other borrowers. In most cases, these investors are actually government entities or government-sponsored companies that buy your mortgage loan so that your lender can continue to sell new mortgage loans. They may also include insurance companies, mortgage real estate investment funds (REITs), the commercial mortgage-backed securities market (CMBS), or Wall Street brokerage firms.
When lenders sell your mortgage loan to institutions like Fannie Mae, Freddie Mac, or the three major government agencies, they sometimes retain management rights. Selling your mortgage allows the lender to “receive an upfront cash payment instead of waiting for you to make payments,” Whitman says. Most mortgage lenders choose to sell your mortgage loan at some point during the term of the mortgage, so you'll want to understand how this process works. Mortgage originators often can't afford to wait 15 to 30 years for loans to be fully repaid, so they bundle the mortgages and sell them to aggregators in the secondary mortgage market.
