Previously, my mortgage remained with the same company for over a decade. After refinancing, I’ve noticed that my mortgage gets sold to a different company every few years. Can anyone explain why this happens so frequently now?
The financial incentive to service loans is lower nowadays, leading companies to frequently buy and sell servicing rights whenever profitable opportunities arise. It’s become a common practice in the industry.
@Kit
Why is the profitability lower now than before?
Hux said:
@Kit
Why is the profitability lower now than before?
With high interest rates, there’s a lot of refinancing which decreases the value of servicing rights. Investors are cautious about paying for a portfolio that might not last long due to these payoffs.
@Paden
So it’s the value of servicing rights that’s down, but the income from servicing remains roughly the same.
It’s all about business strategies. To avoid this, consider going with savings and loans or credit unions that usually keep their mortgages in-house. They operate differently from banks.
Dallas said:
It’s all about business strategies. To avoid this, consider going with savings and loans or credit unions that usually keep their mortgages in-house. They operate differently from banks.
Even many banks and credit unions sell their loans because it’s more profitable to service a larger volume. Most loans in the U.S. end up as securities managed by Fannie Mae, Freddie Mac, or Ginnie Mae.
@Clive
Savings and loans might offer more stability. If my last name were known, people would understand my insights better, but I recommend researching portfolio loans.
Dallas said:
@Clive
Savings and loans might offer more stability. If my last name were known, people would understand my insights better, but I recommend researching portfolio loans.
For those wanting to avoid having their mortgage sold, ask about portfolio loans which are designed to stay with the originating lender.
@Valor
Exactly, not everyone understands the benefits of portfolio loans. Thanks for adding that.
The mortgage industry has evolved significantly. Mortgages are often sold to entities like Fannie Mae or Freddie Mac, who then use servicers to manage the loans. These servicing rights can be sold when it becomes financially advantageous, which has been frequent due to the current economic climate.
It’s quite common now. In my first year, my mortgage was sold three times.
Dakota said:
It’s quite common now. In my first year, my mortgage was sold three times.
Same here, it happened three times just in my first year.
Mortgages are seen as financial assets that are regularly assessed for their market value. Investors decide whether it’s better to hold or sell based on these valuations.
I’ve given up trying to keep up with the changes. Each new servicer comes with different requirements, which can be quite frustrating.
It’s about service release premiums. Servicers earn a fee when they sell the loan servicing rights, which is often more lucrative than waiting for the interest payments over the life of the loan.
My loan was sold three times in the first year after refinancing. After another refinance, it finally stayed with one bank. It seems to be a mix of luck and market conditions.