"My loan was sold!" What happens next?

If you know your loan is going to be sold, or if you just found out your loan was sold, you may be wondering how it could impact your situation. Good news: there's no need to panic! Lenders sell all types of loans to other banks on a regular basis. It’s part of their daily business and it’s how they ensure they can continue to make more loans in the future.

In all likelihood, your mortgage will probably change hands several times as banks buy and sell on the secondary market.

So what is this secondary market all about? And how does it impact the terms of your mortgage?

Let’s start with the impact on your loan. There’s no real impact. You have a contract that guarantees the terms of your mortgage, even after it’s sold to another lender. You may have to change the auto-payment settings on your checking account and call a different customer service number, but there won’t be any changes to any of the terms of your agreement.

Now, why was your loan sold in the first place? And what’s the secondary market? To answer this question you just need to remember that banks are always working to maximize their profits. And sometimes it’s better for them to sell a loan today, instead of waiting 15 or 30 years to collect small chunks in monthly payments.

Some lenders will sell a mortgage immediately after it closes, often lining up buyers while the loan is still being processed. Other lenders wait until they have a batch of loans. Then they sell them together in a single package, which bankers refer to as a “bulk” sale.

Keep in mind that the secondary mortgage market increases competition, which improves mortgage pricing and terms for you as the borrower. So the fact that your loan can be sold is a very good thing and it shouldn’t be perceived any other way.

What happens during the transition?

Once your loan is transferred, a few things will sort themselves out on their own. Your autopay will usually carry over to the new servicer without any action on your part. That said, it’s worth double-checking with the new servicer to make sure everything moved over correctly.

If you accidentally send a payment to your old servicer after the transfer, don’t stress. They’re required to forward it to the new servicer, though it can take a few weeks to process. To avoid any confusion, update your payment details as soon as you get the transfer notice.

You’re protected during the switch

Servicer transfers can catch you off guard, so federal law gives you a buffer. There’s a 60-day transfer period where you’re protected from late fees and negative credit reporting, even if a payment gets lost in the shuffle between servicers. During that window, neither your old nor your new servicer can penalize you for payments that were misdirected because of the transfer.

Your loan terms - your interest rate, monthly payment amount, remaining balance, everything - stay exactly the same. The only thing that changes is where you send the check.