By: Samuel Iden
You just closed on your home last month and now you’ve been notified you’ll be making monthly mortgage payments to a new bank. That fast? Yes, it’s normal.
Many lenders, outside of smaller banks or credit unions, are in the business of originating loans, but not servicing loans in the years that follow. Servicing a loan entails collecting the monthly mortgage payment, handling escrow accounts used for paying annual taxes and insurance premiums, fielding calls from homeowners related to account changes and all the minutia that comes along with handling the loan over the course of 30 or 15 years. Many lenders will sell the loan right after closing, often to an investor like Fannie Mae or Freddie Mac. Once the investor acquires the loan, it is assigned (along with other loans) to a loan servicer who’ll become the point of contact for the homeowner from that point forward. In the years that follow, the investor will often assign the servicing responsibilities to a different loan servicer for any variety of reasons. So it isn’t unusual for a homeowner to make mortgage payments to various loan servicers over the life of a mortgage.
For some buyers, the loan application process can become frustrating when underwriters request very detailed supplemental documentation or information that buyers feels are redundant or self-explanatory. Often times this level of thoroughness is related to the fact that the lender must be certain all boxes are checked on the loan for it to qualify as one the investor will buy after closing. The lender wants to make sure the investor will buy the loan after closing so the lender can in turn use those same funds to originate new loans to other buyers coming through the pipeline. The lenders using this model certainly don’t want to wind up with a loan on their hands that the investor will not buy because it doesn’t meet all of their requirements, as the lender could then be stuck servicing that loan for the next 30 or 15 years. Knowing how important the analysis of the financials are to lenders on the back end of closings can be helpful for buyers to understand why they might be receiving extensive information requests and why the lenders usually cannot proceed without information or documentation critical to their process of operation.
With this knowledge, now you can Rest Easy.
