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'My mortgage was sold': What really happens when a bank hands off your loan
Kelly Suzan Waggoner August 8, 2025 at 8:42 PM
'My mortgage was sold': What really happens when a bank hands off your loan (Catherine Falls Commercial via Getty Images)
You checked all the boxes when buying your new home — shoring up your credit score, shopping for the lowest rates, negotiating fees and ultimately locking in the best deal possible. Then boom: A random letter in the mail saying your mortgage was sold to another bank.
But don't worry: It's not unusual for your hard-won mortgage to get passed off to another lender. It's simply among the ways that banks manage their money and make room for new loans. The law requires your bank to let you know if it's intending to transfer your loan, among other protections. Beyond that, you keep paying your mortgage as usual.
Why would a bank sell your mortgage?
When you get a mortgage, your bank isn't typically expecting to keep your mortgage for the full 15- or 30-year term. To avoid running out of money, banks often sell those mortgages on what's called the secondary market — private investors or government entities like Fannie Mae or Freddie Mac — to free up money they can then lend out to other customers.
Selling a mortgage offers immediate cash flow, an alternative to waiting decades for those payments you're so faithfully paying each month, in addition to other financial incentives that include:
Protection from losses. Your lender no longer runs the risk of you defaulting on your loan.
Staying within bank rules. Since the 1990s, banks have had to follow rules about how many mortgages they could keep, holding money aside in case a loan were to go bad. With fewer mortgages to maintain, a bank frees up that capital to make more loans for more borrowers.
Sticking to their strengths. Many banks specialize in originating loans, which is a lot more profitable than managing a mortgage for 15 years or longer.
What happens when a mortgage is sold?
When your lender sells your mortgage, it transfers your loan to a new financial entity under the exact same terms as your original loan. It doesn't matter how many times after signing your original mortgage it gets sold to another bank — your interest rate, repayments and schedule can't change. The only real difference is the new address you'll send your money to each month.
While some banks end up fully owning the loan, others might hire what's called a third-party servicing company to collect payments, provide customer support and handle the day-to-day tasks that keep the money moving. If you need help, you might not even notice the person at the other end doesn't actually work for your bank.
🔍 Learn more: What happens to your mortgage after you die?
Your rights during a mortgage transfer
Federal law require banks to provide three specific protections for borrowers when a mortgage is sold:
Your current bank or servicer must notify you at least 15 days before the transfer takes place
Your new bank or servicer must reach out within 30 days after the transfer, confirming your loan details
If you accidentally make a payment to your old bank within 60 days after the transfer is complete, your new servicer can't report it as a late payment.
If you receive a letter claiming to be from a new mortgage servicer that you don't recognize, call your current bank to confirm it's legitimate before making any changes to the way you pay your loan.
What you can do about mortgage sales
While you can't control whether your mortgage is sold, you can take steps during the homebuying process to prepare for it.
When shopping for a mortgage, ask each lender whether it usually keeps loans or sells them. Credit unions and smaller banks are more likely than national chains to keep your mortgage in-house. Read through your loan documents for information about potential sales, and note anything you might need more information to understand.
If you end up on the end of a mortgage sale, file any letters, email or account information in a place you'll remember, should any issues arise. Check that all information — including your name, account balance and payment history — are correct, and flag any inconsistencies as soon as you can. Your transfer notice will include all the details you need to get in touch with your new servicer. Use it to update any automatic payments you've set up.
Finally, keep a close eye on your credit reports for at least six months after the transfer. Regularly reviewing your credit reports can help you catch mistakes or errors early, giving you a chance to report and correct them. Order your reports from each of the three reporting bureaus through the federally authorized AnnualCreditReport.com.
Can you switch your mortgage lender?
Unfortunately, no. While you can pick your lender before you close on a mortgage, it's not easy to change your lender after the loan's in place and you've started making payments. If you're unhappy with your lender, your only choice is to refinance your mortgage. Even then, there's no guarantee your new loan won't get sold too.
🔍 Learn more: How much does a 1% change in mortgage rates actually matter? (Hint: More than you think)
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Home equity vs. home improvement loan: Which is best for updates or renovations?
Do you qualify for homebuyer assistance? You might — even if you've already owned a home
📩 Have thoughts or comments about this story — or ideas on topics you'd like us to cover? Reach out to our team at [email protected].
Source: "AOL Money"
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