What To Do When Your Mortgage Is Sold To Another Bank

by Kevin on April 26, 2012

What should you do if you get a letter in the mail letting you know your mortgage has been sold from the original financing company to a bank?

Is it time to panic or just go on with your daily life like normal? And why do banks sell mortgages in the first place?

Your Mortgage is an Asset to the Mortgage Originator

When a bank originates a mortgage, it becomes an income producing asset on their balance sheet. They’ve already earned some fees from you from loan origination fees, which helps pad their profits on the loan. But they see your loan as an asset, and assets can be sold to new buyers.

Who Buys Mortgages?

Mortgage loans are sold on the secondary mortgage market where, essentially, your loan can be chopped up, combined with other loans, and sold as an investment. This is part of the reason the housing crisis turned into a financial crisis: there were a lot of packaged loans that were supposed to be bringing in a certain amount of interest income that stopped producing interest income at all. Those “safe” mortgage assets were sitting on bank balance sheets and became toxic — if you bought something intending to make consistent income off of it and it doesn’t produce at all, you’ve suddenly lost a lot of money.

There’s a great explanation of how the secondary mortgage market works at Investopedia. It walks through the major players and how your loan can be resold so many times.

Why Banks Sell Mortgages

Why would your bank want to sell your mortgage? First, obviously, is to profit. Second, by getting rid of your mortgage they can free up the capital (the thousands of dollars the bank lent you that it is now on the hook to recoup over the next 15 to 30 years) to then lend to a new borrower. They want to lend to another borrower, and the borrower after that, and so on, so they can earn origination fees, interest income, and commissions for selling the loan.

A bank may originate your loan today and immediately sell it on the secondary market. You may never be made aware of this (except buried deep in the paperwork) because your original bank may continue to service the loan throughout its term.

However, the servicing of your loan can be sold as well. If the lender intends to sell of the servicing of your loan as well, they must must disclose this to you per rules of the National Affordable Housing Act. In this case, when your loan is sold and the servicing with it, you must be notified of the loan-servicing sale no later than 15 days before the sale is to take place. Likewise, the new loan holder has to contact you within 15 days of the sale transfer occurring.

Steps to Take If Your Mortgage is Sold

If your mortgage is sold, you need to take notice and check on a few things.

First, has your loan been sold? Or has the loan and the servicing been sold? This is important because if the servicing has been sold as well your payments will be going to a new address (or a new website). You don’t want to send in a payment to the old servicer, only to have it returned weeks later and finding out you are now late on your mortgage.

You should receive notification in writing of the sale. This notification should give you specific instructions on what to do with your payments.

Second, don’t stop paying your mortgage. Even if you don’t get a follow up letter from the company that bought your loan, you must keep making payments. Usually a letter you receive will tell you that you should send payments to the old servicer up to the date before your next payment is due. On and after the due date, you should send payments into the new company. Again, the notification you receive in writing should indicate what to do.

Third, make sure your payments are processed and applied correctly. Just because you sent in a check and it was deposited doesn’t mean that somewhere in the banking system there isn’t an error showing you having not paid. This is especially true when your mortgage is sold — make absolutely sure the payment went through and was credited to your account correctly.

Aside from that, you have nothing to worry about. Keep paying on your mortgage like you always have, just make sure its to the new mortgage servicer.


John April 28, 2012 at 3:03 pm

This is a great article. I wish I had read this when our mortgage was sold to another bank. When we first got a letter in the mail regarding the mortgage sale, I was quite frustrated that mortgages could be sold – had no idea!

nanci October 22, 2012 at 4:31 pm

what if the hello bank is not the bank you want your mortgage with? doesnt the homeowner have any say in the change.?

ted meskers December 1, 2012 at 1:53 pm

When a lender sells your loan, which is in default, and another lender buys that loan, the question is why? Yes, the obvious reason is to regain some of their capital, another is to remove a headache from their books – however, if you are the borrower, and you loan has been sold to various lenders, why would the new lenders take on a loan in default?

It’s all about money – in my opinion, the banks sell off these troubled loans at a discount to another lender, without the borrower ever being given the opportunity to bid on the loan themselves. On top of that, what was paid for your loan isn’t exactly public knowledge – it’s kept secret. Some people in default have had their loans sold four, five and six times and each lender gave a discount the the next lender willing to take the chance.
How can a borrower find out how much was paid for his/her loan to the current lender in place? If lenders just sell your loan to anyone at anytime, why can’t the borrower be a part to that and know what is being offered to others?

rick booth November 1, 2015 at 3:53 pm

Right on. You nailed it. I am trying to find out how much BBT sold my mortgage to Towd Point Master Funding Trust 2014-R.

Kevin March 18, 2014 at 9:21 pm

My main issue with my loan being sold is it has been sold once a year.
And the servicers messing up the payments (misapplying or not applying), having to send proof of current insurance every time it is sold, servicer trying to charge for Insurance I already have and I already sent the docs, or receive threatening calls 5-10 days after payment, because they misapplied the payment. This is nuts, sure they make money, but I get to deal with their crappy software or personnel glitches when I could be working which helps me pay the darn mortgage. Talking with them once a month for 30 – 60 minutes is ridiculous.

I may have good credit, are in good standing, but my patience is sliding down fast.

izraual June 22, 2015 at 11:02 am

Are they selling the loan or just the interest in it? I guess that would depend if it was still a loan or converted to a security/stock. That would be big deal and important to know if it was. If you default and find out a trust is foreclosing on you, then what? Why? Look up foreclosure fraud and ask yourself how the hell did all these peoples foreclosure cases become securities fraud litigation’s?

Kelli winger May 16, 2014 at 2:46 pm

If you bank mortgage was sold to another bank where you credit card debt can they attach it?

Thanks. I also wish I had read this article found out by phone from my old bank when trying to make a payment.

izraul February 27, 2015 at 3:40 am

Come man… really?! lol…

Just keep paying and do nothing? Yeah… and in 30 years when you finally pay it all off and expect to get your note in return, you find out they don’t have it.. does it matter? YES! I

f they sold it and kept collecting payments fraudulently then guess what… your screwed! And now whoever owns your note can come and demand payment and you will have no choice but to either pay a second time.. or lose your home! Does this happen? All the time!

You need to always check up on your loan wether your in trouble or not… send a QWR! Make them verify everything atleast every 5 years.. If your paying the wrong person you can get that $ back .. You will be glad you did…

chuck March 2, 2015 at 10:13 pm

We got a loan through sterling savings, a local bank that has Done home loans and construction loans for decades. They sold my loan to the freaking Alabama housing authority (service solutions) across the country where no one speaks educated Englisha b d service sucks. We ghost ave been very pissed off since this happened before our first payment was even due…they screwed up on our escrow, taxes, two Months behind on our insurance they are to pay twice…it’s a joke. Do we have any recourse?

izraual June 22, 2015 at 10:15 am

Hey Chuck, I don’t know about the recourse you may have in that state. Also, it would depend on how long ago this happened. The 1st thing I would do is comb through your mortgage docs very carefully. Look for signatures and notaries then look up the names and find out what you can about them. Was all your TILA information given? Are within the rescission period? Read everything closely. In the mean time you should send a Qualified Written Request (“QWR”). Find out who really funded the loan. You can find examples on line. They have to answer your questions or pay a fine to you if not. Write down all the names of anyone involved i.e. title company, escrow agent., and check their license and standing in your state. Find out if your loan was securitized and if so what trust is it in. Then check if its a REMIC trust. I’m sure you’ll find sooner or later the question will be, was it really a mortgage loan for you or a sale for a security by you?

Noemi June 15, 2015 at 10:42 am

This is sooo FRUSTRATING!! My payment has been lost somewhere so now I have to fax over bank statements showing prior bank took payment out! It’s just ridiculous!!!

izraual June 22, 2015 at 10:53 am

How many people would be pissed if they found the banks used your signature (identity theft) in securities sale scheme that paid the mortgage off to the original funder of the loan (the one hiddin from you)in full and then they and other 3rd party investors made 10x what they say you owe on the mortgage for themselves? All without your knowledge or consent. Now if your original note is gone how can you obtain after paying 30 years? Now imagine if they intentionally fixed the deal so you default, and they take the house before that happens and do it all over again to the next person.

So now the questions is do they still have your original wet ink signature note? Ask them to see it and see what happens.

FrontnCenter November 3, 2015 at 2:57 pm

If anyone had the bank tell them to stop paying for a loan mod you want to sue for “tortuous interference with contract”. They obstructed your right to perform your obligations..

Erick Brunet November 23, 2015 at 9:18 pm

Great post! Thank you for sharing. Hope to hear more from you.

linda mansfield August 5, 2016 at 9:51 pm

I have a mortgage..i fell behind then they agreed to 350.00 a month i have been paying that since january 2012 and never missed the 350 pymt. i was sold to quimby ventures they sent my check back and said it was insufficient since it wasnt the original amount of 512.65. But i had the prior agreement for 350 a month and now im worried because of this. What can I do?

linda mansfield August 5, 2016 at 9:52 pm

quimby just got my loan..they bought it from ocwen loan servicing

linda mansfield August 5, 2016 at 9:53 pm

Im absolutely terrified i will lose my home and they will take it. Im panicking

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