Sometimes I use my blog as a medium to rant about the funny things people do with their money; but other times I tackle common questions that I receive from readers or overhear when I’m wondering the
golf course streets.
One common question/comment I’ve gotten recently has been around mortgages. “Why did my bank sell my mortgage? I want to find a bank that holds onto my loan.” While this may be a big deal to someone who is shopping around to refinance, it’s rather insignificant so a high-level overview is all that’s required.
First Thing To Consider
There are a lot of capital requirements for banks. While this is great protection for depositors, it also limits the amount of loans a bank can have on it’s books.
Second Thing To Consider
I don’t care how many times you’ve been turned down for a loan, banks DO like lending money. One thing banks do not like, however, is waiting 30 years for you to repay them. It’s much easier for a bank to originate a mortgage, sell it for a quick commission, and then start the process all over again.
Third Thing To Consider
While a few smaller banks may keep your mortgage in their portfolio, the majority of mortgages are sold in the secondary market – mostly likely to Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). These pools of mortgages (mortgage-backed securities) are then sold to investors.
Fourth Thing To Consider
The first three things to consider don’t affect you, so don’t worry about them.
The Only Thing To Consider
Without your knowledge or consent, mortgage-backed securities are sold all day long. It doesn’t affect you because you continue to make your payment to the same bank. A more rare occurrence, which should worry you, is if your mortgage servicer changes. This can be an annoyance. I’ve seen a number of cases where, in transition, a payment is misapplied or, even worse, lost completely.
Have you ever wondered what happened to your mortgage? Have you ever been notified that your servicer is changing?