It’s common for your mortgage to be sold after closing, especially when dealing with correspondent lenders. loan is typically sold after closing by correspondent lenders These lenders originate, underwrite, and fund the loan using their own money, but the loan is typically sold after closing to a larger investor like Fannie Mae or Freddie Mac. This frees up the correspondent lender’s capital to make new loans. Your loan terms remain unchanged, and often the original lender continues servicing the loan, managing your payments.
In this in-depth guide, we’ll walk you through how loan sales work after closing, what changes (and what doesn’t), and what actions you should take to stay informed and protected.
What Does It Mean When a Loan Is Sold After Closing?
When your mortgage closes, your lender may choose to sell either:
- The loan itself to an investor (such as Fannie Mae, Freddie Mac, or a private institution)
- The servicing rights to a company that specializes in collecting payments and managing escrow
Quick Definitions:
- Loan Owner (Investor): The entity that holds the financial stake in your mortgage
- Loan Servicer: The company responsible for the day-to-day management of your loan, including collecting payments and handling taxes/insurance
Example:
Let’s say you get your mortgage from “GreenTree Lending.” A month after closing, you receive a letter from “OakHill Mortgage Services” saying they’ll now collect your payments. In this case, OakHill may have purchased the servicing rights—you still owe the same loan, just to a new servicer.
Why Do Lenders Sell Loans?
Lenders aren’t trying to confuse you—they’re optimizing their business models. Here’s why loan sales are so common:
1. To Recycle Capital
Most lenders don’t keep loans on their books. Instead, they sell them to investors to free up money to issue more loans.
2. To Reduce Risk Exposure
Selling mortgages helps lenders diversify and manage financial risks, particularly in a volatile housing market.
3. To Focus on Core Services
Many banks and lenders prefer to focus on loan origination rather than long-term servicing. Selling the loan (or servicing rights) allows them to do just that.
What Happens When a Loan Is Sold? A Step-by-Step Breakdown
Here’s how the process typically unfolds:
Step 1: Your Loan Closes
You sign final documents, and your loan is funded by the originating lender.
Step 2: Loan Sale or Servicing Transfer
Within weeks or months, the lender sells your loan or the servicing rights to another party.
Step 3: You Receive Transfer Notices
Federal law mandates that you receive:
- A “Goodbye Letter” from the current servicer
- A “Welcome Letter” from the new servicer
These must be sent at least 15 days before the effective transfer date.
Step 4: Your Payments Are Redirected
From the date listed in your welcome letter, all future payments must go to the new servicer.
Step 5: Grace Period for Transition
Under the Real Estate Settlement Procedures Act (RESPA), a 60-day grace period protects you from late fees or credit damage due to misdirected payments.
Does the Loan Sale Affect Your Mortgage Terms?
No, your loan terms do not change.
Your:
- 💸 Interest rate
- Loan term (e.g., 30 years)
- Monthly principal and interest payment
- Amortization schedule
But you might notice:
- Different billing statements
- A new payment portal or address
- Changes in customer service standards or responsiveness
Data Snapshot: How Common Are Loan Sales?
According to the Mortgage Bankers Association:
- Over 60% of mortgages originated in the U.S. are sold on the secondary market.
- Fannie Mae and Freddie Mac purchase more than half of these loans.
- Servicing rights are often transferred multiple times during a 30-year loan term.
This means it’s highly likely that your loan will change hands at least once—and possibly several times—over its lifetime.
Real-Life Example: Visualizing the Impact
Scenario:
- You closed a $400,000 mortgage at 7% interest, fixed for 30 years.
- Your monthly principal and interest payment: $2,661.21
- One month later, your loan is sold to Fannie Mae and serviced by NewWave Servicing.
What to Do When Your Loan Is Sold: A Borrower’s Checklist
Here’s how to stay on top of the transition:
Confirm the Transfer Legitimacy
- Check both letters for matching loan numbers
- Contact your old servicer to verify the new servicer
Update Your Records
- Adjust online bill payments
- Notify your bank if you have automatic debits set up
Monitor Escrow and Insurance
- Call your insurance provider to confirm they have the new servicer’s info
- Ensure your taxes are still being paid on time
Set Up Your Online Account
- Create a new profile with your new servicer’s portal
- Set payment reminders and enable alerts
Keep All Documentation
- Save copies of goodbye/welcome letters
- Note the transfer date and new contact details
FAQs: Borrowers’ Common Questions
What if I accidentally send a payment to the old servicer?
No problem during the first 60 days—your payment will be forwarded, and no late fee will be charged.
Can I refuse a loan sale or servicing transfer?
No. These transfers are allowed under your loan agreement and are standard industry practice.
Will the new servicer offer different loan modification or hardship options?
Yes, policies can differ. Contact them directly if you’re struggling to make payments or want to explore refinancing.
Final Thoughts: Stay Calm and Stay Organized
When you receive that letter saying your loan has been sold, don’t panic. It’s a routine transaction that doesn’t alter your financial commitment. However, it does mean you need to be proactive:
Remember, you still own your loan—you’re just sending your payments to a new place. The more informed you are, the smoother the experience.