Customers frequently ask us if we intend to sell their mortgage loans after closing. In this Q&A style post, we explain exactly what happens after closing and how it can benefit you.
What happens to your mortgage loan after closing?
Except for in rare situations, we continue to serve as your main point of contact after closing. We also service 98% of the loans we finance (based on 2020 numbers). We sell the majority of our mortgage loans to Freddie Mac, but we still service them. The fact that we continue to service loans after selling is what sets us apart from other, high-profile lenders.
What does it mean to “service” a loan?
In short, you pay your monthly mortgage payment directly to us and continue to work with our loan officers or loan servicing department on any situation that may arise. This can make situations such as homeowners insurance claims and mortgage payment accommodations during tough financial times much easier to handle.
On occasion, we also finance Rural Development (RD), Federal Housing Administration (FHA), and Veteran’s Affairs (VA) loans. We are not able to service these types loans, so they are the exception.
So why do we sell loans in the first place?
First, we don’t sell all of them. We do offer in-house loans that we keep and fully service, as well. This is less common, however, because our in-house loans are not backed by the government and usually have higher interest rates. The rates tend to be higher because these types of loans carry more risk.
Freddie Mac loans, however, are backed by the government. This lessens the risk for the bank and allows our customers to obtain low, long-term fixed interest rates.
Selling loans to Freddie Mac also enables us to loan more money to more customers, positively affecting our local real-estate market and our local economy.
In conclusion, though we sell the majority of our mortgage loans, our customers remain largely unaffected. In most cases, you continue to pay us directly, and continue to work with your loan officer or our loan servicing department long after closing.