When you buy a house, you sit down at a table with a mortgage company to sign your paperwork, probably assuming you’ll be making payments to that company until you someday move. Not so fast – in the vast majority of cases, that first mortgage will be sold to another party during your loan term. If that mortgage is transferred to Fannie Mae, it will either be serviced by your current lender or a new one, and your notification will come from both the old and new loan servicer.
Your mortgage may change hands multiple times over the course of your time in a home. When that happens, your loan servicers will typically notify you, not Fannie Mae.
Does Fannie Mae Mail Letters?
When you sign on the dotted line, your lender probably disclosed somewhere in the fine print that your loan could be sold at some point. This disclosure is required under federal law, but it can understandably be buried in the pile of paperwork. It’s important to note that selling mortgages is very common, as is Fannie Mae purchasing large bundles of mortgages and selling them to another lender.
If your mortgage is sold to Fannie Mae, don’t expect any FNMA offer letters to arrive in the mail. In fact, your loan can be sold multiple times, and you’ll never hear a word about it. Since Fannie Mae is not a loan servicer, when they buy your loan, you may not even receive notification. However, if your payment needs to go to a different servicer, both the current and new lenders will need to let you know.
Notification of Servicer Change
Even if FNMA doesn’t offer letters to notify you when your loan sells, you will be notified if your servicer changes. There are two notifications you’ll receive. One will be from your current servicer and will come 15 days before the transfer of your loan takes effect. The other notice will come from your new loan servicer and will have instructions on any action you need to take.
Chances are, your notification will include information on how to make payments moving forward. If you’re having your mortgage automatically paid out of your bank account, you’ll probably need to provide your banking information to the new loan servicer. Even if instructions aren’t included, get in touch with the new loan servicer to see if you need to provide your banking details so this can continue.
There will also be a grace period during which time you can miss payments without penalty. This grace period is in place to give borrowers time to adjust any autopayments. If you pay by mail or you manually transfer the money, it also allows your old lender time to notify you if you accidentally send it to the wrong place.
Fannie Mae and Mortgages
Fannie Mae is short for the Federal National Mortgage Association, which was founded in 1938 in response to the Great Depression. It operates solely to help keep the economy strong by stimulating the housing market. When you have a mortgage transferred to Fannie Mae, your loan servicer doesn’t change right away.
Fannie Mae is among the largest purchasers of mortgages operating in what’s known as the secondary housing market. Freddie Mac is another government-sponsored enterprise that specializes in purchasing and reselling mortgages on the secondary market. Once Fannie Mae buys a group of mortgages, they’re turned into mortgage-backed securities, which are then bought by investment banks, insurance companies and pension funds.
Why Lenders Sell Mortgages
A mortgage company didn’t loan you hundreds of thousands of dollars out of the goodness of its heart. It did so to make money off the interest you’ll be paying each month. So why wouldn’t the lender want to continue to earn that interest?
The truth is, the interest you pay each month is small potatoes compared to what mortgage companies can make immediately by selling their loans off in bundles. Also, when your lender sells your mortgage off, it frees up capital so it can issue new loans to homebuyers just like you. That also explains how Fannie Mae’s mortgage purchases, which they turn into mortgage-backed securities, help keep the economy, and the mortgage industry in particular, going
Fannie Mae Loan Ownership
Even if you never receive a single piece of Fannie Mae mail, the government-sponsored enterprise may own your mortgage. All of your payment, questions and concerns will be addressed to your loan servicer, though, so there’s typically no need to even be aware that Fannie Mae is the owner.
In addition to buying mortgages and backing them, Fannie Mae also helps with loan modifications. If you somehow become unable to pay your mortgage, your lender will want to do everything possible to keep you from foreclosing. Supported by Fannie Mae, loan modifications allow a borrower to change the conditions of a loan in order to be able to continue to pay mortgage payments each month.
Fannie Mae Benefits to Homeowners
If your mortgage transferred to Fannie Mae without you realizing it, you may be missing a great opportunity. Fannie Mae mortgages could be eligible for programs that will make your mortgage more affordable. You could refinance your home or make renovations that improve the terms of your loan.
The easiest way to determine if Fannie Mae owns your mortgage is to input your details at Fannie Mae's Know Your Options website, but you can also contact your mortgage company and ask. If you’d prefer to call Fannie Mae to find out, the number is 1-800-2FANNIE and they’re reachable between the hours of 8 a.m. and 8 p.m. EST.
Fannie Mae’s Lender Requirements
To qualify for Fannie Mae’s protections, lenders must follow guidelines established to protect the housing market. The biggest of these is that they can’t engage in the kind of unethical lending practices that caused the housing crash that happened in the late 2000s. This especially applies to subprime loans, which were once issued to high-risk borrowers at higher rates.
The Federal Housing Finance Agency also imposes limits on lenders who want to be backed by Fannie Mae. Currently, only conventional loans of up to $484,350 for single-family homes will be covered, but those living in high-cost areas like Hawaii and Alaska can see that limit rise as high as $726,525.
Mortgage Transfers and the Borrower
That letter notifying you that your mortgage is being transferred can seem a bit intimidating. What if something is lost in the transfer and your home is foreclosed as a result? Mortgage servicers are under very strict legal obligations to protect all borrowers during the transfer process. This means all your information should be seamlessly shifted to the new servicer without an issue, but mistakes can happen.
It's important to watch for notifications from both your departing loan servicer and the new company. On the designated date, monitor your bank account to make sure the money comes out of your account. If something does go wrong, know your rights and, if all else fails, file a complaint with the Consumer Financial Protection Bureau.
The Loan-Servicing Transition
Although your transition should be smooth, your biggest concern may be that your payment might be late in the process. The communication you receive from the new company should state that there will be a grace period during which payments won’t be treated as late if they happen to be delayed for some reason. Legally, this grace period should be 60 days and is designed to help the customers who may continue to send payment to the old servicer.
During the transition period, your loan servicer is legally required to respond. Send those concerns to your lender in writing, separately from your payment, noting explicitly in the letter that this is a “qualified written request under Section 6 of RESPA,” which is the Real Estate Settlement Procedures Act. Your servicer is required to respond within 60 business days of receiving your written request.
Foreclosure Proceedings and Overdue Loans
If your home goes into foreclosure and Fannie Mae owns the loan, you won’t get Fannie Mae mail about it. Instead, your loan servicer will attempt to reach you multiple times to resolve the issue. Once you reach 30 to 45 days past due, you’ll receive a Notice of Default, usually by certified mail. This notice will give you a fixed timeframe to pay the overdue amount.
Homeowners that don’t pay after the Notice of Default will enter the foreclosure process. After your payment crosses the 90-day threshold, your lender may file a request to sell the property, which will require a court order. During this time, you can work with your lender to stop the foreclosure process, which will generally mean paying all past due amounts along with any costs the lender accrued.
Foreclosures and Fannie Mae
Although FNMA doesn’t offer letters of foreclosure, even if it holds the loan, the enterprise will work with lenders to halt foreclosure when possible. Once your loan reaches the 90-day point, your servicer is required to review your loan for something called a flex modification. If approved, you’ll be able to modify your loan so that you can continue to pay rather than entering foreclosure.
Only loans owned by Fannie Mae qualify for a flex modification. It also must be a conventional first mortgage, and you’ll be required to have been in the home at least 12 months before the evaluation takes place. Although approval isn’t easy, if you qualify, you may see a lower interest rate, extended loan terms or principal forbearance. In some cases, flex modification may add your overdue amounts to the total loan amount to buy you some time.
Approval for a flex modification isn’t permanent. You’ll have a trial period, typically lasting several months, during which you’ll need to make all your payments on time. Upon successful completion of the trial, your loan will be permanently modified, and applicable penalties will be waived.
Future Loan Sales
Your loan can be sold and transferred an unlimited number of times during your time in your house, even without you being aware of it. If your loan servicer changes and you need to send payment to a new party, you’ll be notified in advance of the change to ensure you continue making payments. Chances are, you’ll rarely have contact with your mortgage company, as long as you make payments on time and you receive your annual escrow statement.
When you buy another house, the mortgage company you choose will work directly with you throughout the process of purchasing your home. This lender later becomes known as the loan originator if your mortgage changes hands. If you’re concerned about your mortgage being sold after closing, ask your loan originator to go over that section of the paperwork with you during the closing process.
- The Mortgage Reports: What Happens When My Mortgage Is Sold? Dos and Don’ts
- Fannie Mae: Mortgage Products
- USA.gov: Complaints About Mortgage Companies
- 995Hope.org: So What Exactly Does It Mean to Be Facing Foreclosure?
- Mortgage Hippo: Why Was My Mortgage Sold to Another Company?
- Investopedia: Fannie Mae: What It Does and How It Operates
- SmartAsset: Your Mortgage Loan Has Been Sold: Now What?
- Huffington Post: What You Should Worry About If Your Lender Sold Your Mortgage to Another Bank
- Bankrate: What Does a Mortgage Servicer Do, and What Happens When I Get a New One?