Understanding Your Mortgage: What’s Behind The Scenes

Understanding Your Mortgage: What’s Behind The Scenes | The Loaded Pig

When you’re applying for a mortgage, the lingo can be confusing and there is certainly a lot to learn. But after you’ve closed on the house, it can get even more complicated. Don’t be surprised to find out that your mortgage was sold – it happens more often than you think. Read on to get to know the key players in the behind the scenes of mortgages.

Mortgage Originator

This is the individual or loan officer who you deal with on the phone, online or in person to decide which loan terms are right for you and then they help you through the mortgage approval process all the way to closing. They are employed by a mortgage lender and act not only as a salesperson, but also as a manager through the whole process. They manage you, as the borrower and customer, as well as the processors, underwriters and closers.

Mortgage Lender or Owner

Mortgage Lender | Understanding Your Mortgage: What’s Behind The Scenes | The Loaded Pig

The mortgage lender or the owner of the mortgage loan is the financial institution that is lending you money. This is the company that funds your loan to allow you to buy your house. Mortgage lenders can be traditional banks, like Wells Fargo or Bank of America, or they can be companies that specialize in mortgage lending like Quicken Loans.

Mortgage Servicer

In some cases the mortgage lender may also be the servicer, but usually the company that you make your payments to is not the same as the mortgage lender. The mortgage servicer is the company that the lender pays to actually manage the loan. They deal with escrow and are responsible for paying your taxes and home insurance. The servicer is who you ought to contact if there are any issues with your payments or anything else.

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Why Mortgages Are Sold

Why Mortgages Are Sold | Time | Money | Understanding Your Mortgage: What’s Behind The Scenes | The Loaded Pig

Depending on how long the terms of your mortgage is, the lender may not make very much money until 15-30 years after you close on your home. They also may not have the funds to continue lending to so many borrowers so they sell mortgages. Government agencies like Fannie Mae or Freddie Mac actually purchase bundles of mortgages with similar risk levels from lenders as investments. They then sell them as a mortgage-backed security.

What Happens If Your Mortgage Is Sold

You will be notified via mail by the old mortgage owner and the new mortgage owner if your mortgage loan is sold. The terms of your loan will not change as that was agreed upon at closing. You may have a new mortgage servicer, so be sure to check the details of the change before sending any payments, although there is a 60 day grace period for payments in such cases.

There are some people out there who take advantage of this common practice and may send you a fraudulent letter claiming your loan was sold. Be sure that you have received the letter from both the old loan owner and the new one. Compare the details and verify they are the same before sending any payments. In some cases, your loan servicer will stay the same in which case you won’t be affected by this change.

Understanding mortgages and all of the inner workings can be daunting. However, knowing these key players will help you navigate your mortgage and prevent some confusion. If you’ve already closed on your house, find out a few inexpensive updates that you can do to increase its value. If you’re still looking at houses, find out what to look for to increase your chances that your home’s value will appreciate.

Our Take

We bought our home with a mortgage loan from Better.com last year and were notified about 2 months after closing that our loan was “transferred” to another mortgage lender/owner. Our mortgage servicer also changed, which has actually improved the level of customer service we receive. After this experience, we really wanted to know more about what happens after you get a mortgage that could impact borrowers, so we did our research and wrote about it in hopes of helping other people learn about this proactively rather than reactively – as we did.

Financial freedom begins with good habits.

Rebecca & Tiago, theloadedpig.com

Rebecca co-founded The Loaded Pig with the goal of helping people achieve their financial goals. Her passion for financial freedom has landed her on US News & World Report, CreditCards.com, Cheapism, and many other sites. Rebecca earned her Master of Business Administration from the University of Florida and her Bachelor of Arts from the University of Miami. She is currently a professor in the business department at Broward College.