I did a re-fi with a new lender a couple of months ago. Today I got a letter that started out like this:
[QUOTE=Fannie Mae]
The ownership of your first lien mortgage on (address) with an original principal balance of (amount) has been transferred by (mortgage holder) to Fannie Mae.
[/QUOTE]
The rest of the letter tells me that this does not affect the terms of the mortgage, and that the original mortgage holder is still servicing the mortgage, and I should continue to send my payments to them.
Fine, effectively no change to me.
The letter refers to this as a “transfer of ownership” of the mortgage loan. Later it says that “if your loan is sold, your new lender may have different payment policies.”
So I have questions, and I hope some of you have some experience or knowledge to help me understand.
Why did the original mortgage holder do this, i.e. what’s in it for them? And what’s in it for Fannie Mae?
Who actually owns my mortgage now (i.e. if I were to default who would foreclose on and take control of the house)?
Are there really no consequences for me? I ask because they promised me they would not sell my mortgage.
Who promised you this and in what form? I mean was it in writing as part of the loan docs? It would be exceedingly unusual for a loan to have such a provision.
I think it was an oral promise, but it might have been in an email. I could check, but I’m not sure that is really the point.
Did they really “sell” my mortgage, since they are still servicing it? And since apparently Fannie Mae thinks the original mortgage holder could actually sell it in the future, they must still own it in some sense.
The originator of your mortgage has little incentive to hold your note on its books. Nobody wants to tie up that much money to wait 30 years to get repaid at 3.6% interest (or whatever it is). If interest rates go up, then they are not optimizing the use of that money. If interest rates go down, they know you’ll just refinance out of it. So almost every originator sells the note. Fannie and Freddie will pool them with a bunch of other loans and then sell them to other investors. Fannie’s original objective was to increase institutional funds available for home lending – now your originator can take the money they got for your note and make another loan to someone else. I mean, Fannie is not a charity; they make money too. But this answer is already too long.
For the moment, Fannie owns your mortgage, but your servicer still has the responsibility to administer the loan (e.g., collecting payments, performing loan mods, foreclosing on properties, etc.)
There are really no consequences for you if the originator has retained servicing. They could, in the future, also sell off the servicing rights, though. I think maybe they meant that, that they wouldn’t sell the servicing rights? I don’t know.
Thanks, ReticulatingSplines. Especially for the answer to question 1 (your answer was not too long for me, but I get the drift). And I think the answer to your question in #3 is probably yes.
The bottom line is that this happens very frequently. For loans originated by commercial banks and “mortgage companies”, the vast majority get sold. Some local banks and credit unions will keep some mortgages on their books, but even they sell most of their loans.
In the mortgage industry, “originating”, “holding” and “servicing” the loans are three distinct business operations. Sometimes two or three are handled by the same lender, but often they end up being performed by three different entities. “Originating” is what the name implies - taking the application, doing the underwriting and conducting the settlement. “Servicing” the loan means collecting the monthly loan payment and handling the escrow for real estate taxes, insurance and PMI (if any) for whoever “holds” the loan. Some companies want to make the originating money and then move on and not handle payments or anything else. As mentioned, most lenders do not want to hold the loans on their books, so loans get consolidated and sold to FNMA. When Bank A sells your $300k loan, they get that money back to lend to someone else, earning origination fees all over again. Servicing the loan captures fees on a continuous basis, which is really a book-keeping enterprise.
If your original lender is still servicing the loan, you should see nothing different at all. If servicing the loan gets transferred at some point, you will be notified to send your payments to a different place. But changes in holding and servicing the loan should change nothing at all regarding the details of the loan - interest rate, number of payments, etc.
I got my mortgage through a credit union. The documents contained language to the effect of “we do not intend to sell this loan,” and the mortgage officer made the same statement.
It was, of course, sold within 24 hours of the loan closing. We got the notice of sale before we got the certified loan documents.
What they probably disclosed is that they won’t transfer servicing, which is required to be disclosed by TILA-RESPA. Of course, I’m surprised they would even say that. I work for a lender and we always disclose that we may transfer the servicing, even if we intend to retain it.