Your Mortgage Has Been Sold: Now What?
In 1990, Congress moved to regulate the assignment, transfer or sale of mortgage loans. As part of the National Affordable Housing Act, certain provisions were added to the Real Estate Settlement Procedures Act (RESPA):
1. The lender must disclose to the borrower its policy on assigning or selling loans at the time a borrower applies for a mortgage loan. HUD has written a model disclosure statement that all federally related mortgage lenders must use.
2. If a lender assigns, sells or transfers your loan, both your current lender and the mortgage buyer must make certain disclosures, including the name, address and telephone number of the transferee, as well as the effective date of the transfer.
3. Each disclosure statement must declare that the transfer does not affect any term of the mortgage other than who’s servicing the loan (receiving the payments).
4. A 60-day grace period ensures that borrowers can’t be penalized if they mistakenly send payments to the old lender.
Organizations such as the Fannie-Mae and Freddie-Mac purchase large packages of loans from lenders at a discount, providing the individual lender more cash available to generate new mortgage loans. Lenders depend on available cash to do business.