Will you sell my mortgage loan?

When most people ask, "will you sell my loan?" what they really mean is, "will you sell the servicing of my loan?"

Nearly every conventional conforming (Fannie Mae or Freddie Mac) or government (FHA, VA and USDA) loan will be sold on the secondary market.  It wouldn't be practical for lenders to hang onto every loan they originated.  New American Funding, the company for whom I work, is a small to medium sized lender.  And our servicing portfolio is over $58.8 billion.  If we had $58.8 billion outstanding at any one time, we'd go broke!  So the loans are sold on the secondary market, thereby creating new capital so that we can make new loans to new customers.

Nearly all banks sell their loans.  Big banks, little banks, local banks, credit unions, etc.  There are exceptions, like if you're getting a really unusual type of "portfolio" loan.  But most people don't fall into that category.

And your loan being sold is no big deal.  In fact, you'll probably never notice unless you get a letter in the mail.  It doesn't change your interest rate.  It doesn't change your payment amount or where you make your payment or anything related to your loan.  It happens electronically behind the scenes and unless you pay really close attention, you'll have no idea when it happens.

But you will notice if your lender sells the servicing of your loan.  Your servicer sends billing statements, collects payments, and pays property taxes and homeowner's insurance from your escrow account.  You know your servicing has been sold when Speediest Mortgage, for instance, sends you a letter saying that Bank of Liberty is going to handle your mortgage now.  Speediest washes their hands of you.  And now you make your payments to Bank of Liberty, your statements have a Bank of Liberty logo on them, and you call Bank of Liberty customer service when you need help.

When your servicing is sold, the terms of your loan don't change.  You keep the same interest rate, payment, and payoff date.  But it can be a pain, especially if it happens often.

You might have to change your automatic payments with your bank.  You might accidentally send a payment to the wrong lender because you didn't get your notice in time or you just forgot.  You might have really liked Speediest Mortgage and don't particularly care for Bank of Liberty.  Maybe Bank of Liberty accidentally reports a late payment to the credit bureau, which will get corrected in the end, but could be a hassle if you're in the middle of buying a car or financing a vacation home.

So how can you be certain that your loan's servicing won't be sold?  You can't.  Not 100%.  But there are a few things you can do to minimize your chances.

First, make sure you're working with a depository institution or independent mortgage company, who is likely to retain the servicing.  If you utilize a mortgage broker, you won't even know who the lender is until you get to closing.  And with a correspondent lender, your servicing will definitely be sold, probably before you make your first payment.

If you're concerned about the name you write on your check every month, your best bet is to consult with your loan officer. 

Also, while the lender's intent may be to retain servicing, sometimes things change and they (almost) always reserve the right to sell the servicing at any time.  Even if your lender has serviced your loan for ten years, they could decide they need some capital and sell off half their servicing portfolio.  It happens.

But knowing the type of lender you're using and discussing your concerns with your loan officer will both protect you and help you get the best mortgage products for your needs.