I just closed my loan with ABC lender and I received a letter showing that the loan was sold to XYZ lender?! What happened?! Did my payment go up? Have the terms changed? Did someone steal my identity and try to get my information?
Perhaps you have received this same notice and got all confused. If you receive a letter like this (sometimes even before the first payment is made), ABC lender will tell you which lender/bank your loan is sold to and XYZ lender will also send you a letter.
It is always advised to be safe and contact ABC lender to be sure. If your loan has been in place for an extended period of time, your loan may have even been sold several times.
Throughout all this, you may wonder why the lenders go through so much, resulting in extra paperwork. Lenders usually sell loans for one of two reasons: to either free up capital to make loans to other borrowers, or to generate money by selling it while retaining the rights to service the loan. This means that they get the money back from the new lender and charge them for collecting the monthly payments, effectively increasing income.
What does this mean for the borrower, then?
Federal law requires that both the old and new lenders send you a letter telling you about the transaction within 15 days of the sale. The letter should include the name of the new lender, how and where payments should be made, and when your next payment is due.
If you received a letter and would like a second set of eyes to confirm the validity of the info, feel free to reach out to your loan professional (or me)!