For people who have just purchased their first home and have gone through the process of getting a loan, it is sometimes a surprise and a shock when they receive a letter in the mail indicating that their home loan has been purchased by another lender. If this has happened to you, don't worry, it's very normal.
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Mortgages are "promises to pay" with a certain interest rate. In the United States, these "notes" are considered legal tender and can be bought and sold on the market in a similar fashion to other securities. As with all securities and investments, there are laws governing these transactions, and recent legislation has sought to protect the consumer more and more. Mortgages are typically sold once or twice during their lifetime and often end up being grouped together as big investments as "mortgage-backed" securities on Wall Street.
So what happens to you as the borrower when your mortgage is sold? Not much actually. The loan will still be due to the company that purchased it and in the same terms that were originally outlined in the mortgage. If you have setup a direct deposit from your bank to your lender, you will need to set this up with the new company that is servicing your loan. This is often inconvenient and can make the borrower feel that they may be late on a payment as paperwork is sometimes issued late by the new lender. Because of direct deposit, you may forget about your loan payment because it is on "autopilot." You may not be aware that your loan has changed hands, so it is important to pay attention to your mail and read it carefully when a financial institution (that you may not recognize) starts talking about your loan. A good way to tell that something is not junk mail is to look to see if the company has personal information such as your social security number on the letter as well as the total balance of your loan.
If your new lender indicates that you will be late on a payment and you have been unaware that your loan has changed hands, remember that you are protected by the law. Section 6 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C.2605) states, "During the 60-day period following the effective date of the transfer of the loan servicing, a loan payment received may not be treated as late, and a late fee may not be imposed on you." Most lenders are very accommodating with the switch and want to get you settled in to paying your loan with them. Remember, they want your business! A typical loan provides a bank with a lot of interest, so it is in their best interest to keep you happy as a customer. If your loan has changed hands and you weren't aware of it, call your new lender and make arrangements for direct deposit or payment over the phone. Most lenders will waive the payment over the phone fee for new customers!