You’ve just received a letter informing you that your home loan has been purchased by an investor. Maybe you’re upset or confused. You carefully picked the mortgage lender you wanted to work with – does this change or jeopardize that?
We have good news: You don’t have to worry. This is a totally normal part of the mortgage process. Quicken Loans® still services your mortgage, and you’ll still get that great customer service you had before you closed.
So, what is an investor and what does it mean for your mortgage?
Lender vs. Servicer vs. Investor
You may have recently received a letter stating that your loan has been purchased by an investor. Usually, your investor will be one of the three government-owned or government-sponsored corporations that deal in mortgages: Fannie Mae, Freddie Mac and Ginnie Mae. Occasionally, a smaller, non-governmental investor will be the one to purchase your mortgage.
Before we get into the “why” of mortgage investors, it may be helpful to first go over a few different terms:
- A lender is the entity that lent you the money to purchase your home.
- A servicer is the entity that handles your mortgage after you’ve closed on your home. They’re the people you send your monthly payments to.
- An investor is the entity that purchases mortgages from lenders. Investors include Fannie Mae and Freddie Mac, both of which purchase conventional loans, and Ginnie Mae, which purchases FHA and VA loans.
Sometimes lenders will retain the servicing rights on mortgages they originated, while the mortgage itself is purchased by an investor. This means that you’ll still work with and make payments to the same company you got your loan with, but that company doesn’t technically own the mortgage anymore. The servicer collects your payments and passes them along to the investor.
Try not to confuse the above terms with a bank, which is often used as a general term and doesn’t really tell us anything about the entity’s role in your mortgage.
Why Do Mortgages Get Sold?
It’s all about liquidity. Banks and lenders need to have enough money to continue to offer mortgages to home buyers.
Think about the typical 30-year loan term. If a mortgage lender has its money tied up in that transaction for the full 30 years, it will have less money to offer future mortgages. By allowing the mortgage to be purchased by an investor, the lender now has the capital and money flow to continue to lend to other borrowers.
On a larger scale, this process is a part of how the mortgage market works. Investors keep the market liquid so lenders can continue to help borrowers purchase homes.
What Does This Mean for Me?
You’ll continue to work with Quicken Loans® and have access to our customer service. We pride ourselves on being there for our clients and we’ll continue to be there for you, even after your mortgage has been assigned an investor.
Beyond that? It doesn’t mean much for you. You’re required to be notified of who owns your loan, hence the letter. But it doesn’t really affect you. The terms of your loan won’t change, and you’ll continue to make payments to Quicken Loans®.
Sometimes, in addition to selling the loan, a lender will also sell servicing rights on the loan, and the borrower will make their payments to a different entity. However, that’s not what’s happening in the case of an investor sale.
We’ll be there for you not just during the 30 days it takes for you to get the loan, but for the duration of your mortgage needs. No matter where life takes you – whether that’s a new home or a new insurance provider – we’ve got your back.